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DowANNUAL
REPORT
2019
TOGETHER WE DELIVER
OUR PURPOSE
To build, maintain and improve our customers’ operations
through the reliable delivery of safe, cost-effective and
customer-focussed solutions.
Our Vision
Monadelphous will achieve long-term sustainable growth
by being recognised as a leader in our chosen markets
and a truly great company to work for, to work with and
invest in.
We are committed to the safety, wellbeing and
development of our people, the delivery of outstanding
service to our customers and the provision of superior
returns to our shareholders.
Our Competitive Advantage
We deliver what we promise.
Our Values
Safety and Wellbeing
We show concern and actively care for others. We always
think and act safely.
Integrity
We are open and honest in what we say and what we do.
We take responsibility for our work and our actions.
Achievement
We are passionate about achieving success for our
customers, our partners and each other. We seek
solutions, learn and continually improve.
Teamwork
We work as a team in a cooperative, supportive and
friendly environment. We are open-minded and share
our knowledge and achievements.
Loyalty
We develop long-term relationships, earning the respect,
trust and support of our customers, partners and each
other. We are dependable, take ownership and work for
the Company as our own.
Cover Images
Top left: A Monadelphous employee working at the Woodside-operated
Karratha Gas Plant in Western Australia.
Top right: A Monadelphous employee at Rio Tinto’s Cape Lambert port facility
in Western Australia.
Bottom left: The Lal Lal Wind Farm, located in the Moorabool Shire of Victoria.
This page
Bottom right: Monadelphous employees inspecting the relocatable
long-term evolution skid tower at BHP’s Jimblebar mine in the Pilbara
region of Western Australia.
ii | Monadelphous Group Limited | Annual Report 2019
Woodside-operated North Rankin Complex, Australia’s largest offshore processing
facility, located 135 kilometres north-west of Karratha, Western Australia.
Image courtesy of Woodside.
CONTENTS
OVERVIEW
About Monadelphous
Our Services and Locations
OPERATING AND FINANCIAL REVIEW
2018/19 Highlights
Performance at a Glance
Markets and Growth Strategy
Chairman’s Report
Managing Director’s Report
Company Performance
Board of Directors
Engineering Construction
Maintenance and Industrial Services
Sustainability
FINANCIAL REPORT
Directors’ Report
Remuneration Report
Independent Audit Report
Directors’ Declaration
Consolidated Financial Statements
Notes to Consolidated Financial Statements
2
4
6
8
10
12
14
16
18
20
24
28
37
41
54
59
60
65
Investor Information
109
About this Report
The purpose of this Annual Report is to provide Monadelphous’
stakeholders, including shareholders, customers, employees, suppliers
and the wider community, with information about the Company’s
performance during the 2019 financial year.
References in this Report to ‘the year’, ‘the reporting period’ and
‘the period’ relate to the financial year 1 July 2018 to 30 June 2019,
unless otherwise stated. All dollar figures are expressed in Australian
currency, unless otherwise stated.
Monadelphous Group Limited (ABN 28 008 988 547) is the parent
company of the Monadelphous group of companies. In this Report,
unless otherwise stated, references to ‘Monadelphous’, ‘the Company’,
‘we’, ‘its’, ‘us’ and ‘our’ refer to Monadelphous Group Limited and
its subsidiaries.
Annual General Meeting
Shareholders are advised that the Monadelphous Group Limited 2019
Annual General Meeting will be held at The University Club, University
of Western Australia, Crawley, Western Australia,
on Tuesday, 19 November 2019 at 10am (AWST).
Monadelphous Group Limited | Overview | 1
ABOUT
MONADELPHOUS
Monadelphous is an Australian
engineering group headquartered
in Perth, Western Australia,
providing construction,
maintenance and industrial
services to the resources,
energy and infrastructure sectors.
2 | Monadelphous Group Limited | Annual Report 2019
Monadelphous employee on a stacker at Cape Lambert in the Pilbara region of Western Australia.
The Company builds, maintains and improves its customers’ operations
through safe, reliable, innovative and cost-effective service solutions. It aims
to be recognised as a leader in its chosen markets and a truly great company
to work for, work with and invest in.
Our History
Monadelphous emerged from a business which started
in 1972 in Kalgoorlie, Western Australia, providing general
mechanical contracting services to the mining industry.
The name Monadelphous was adopted in 1978 and
by the mid-1980s the Company had expanded into
a number of markets, both interstate and overseas,
and its shares were traded on the second board of
the Australian Stock Exchange.
In the late 1980s, a major restructure of the Company
took place with the business refocussing on maintenance
and construction services in the resources industry.
Monadelphous’ shares were relisted on the main board
of the stock exchange during the 1990 financial year
and the Company established the foundation for sustained
growth with a new management team.
The Company has continued to diversify and extend its
reputation as a supplier of multidisciplinary construction,
maintenance and industrial services to many of the largest
companies in the resources, energy and infrastructure sectors.
Monadelphous’ shares are included in the S&P/ASX 200 index.
Our Operations
Monadelphous has two operating divisions working
predominately in Australia, with overseas operations
in New Zealand, China, Papua New Guinea, Mongolia,
the United States and the Philippines.
Engineering Construction
The Engineering Construction division provides large-scale
multidisciplinary project management and construction
services. These include fabrication, modularisation,
procurement and installation of structural steel,
tankage, mechanical and process equipment, piping,
commissioning, demolition, water asset construction
and maintenance, heavy lift, electrical and instrumentation,
and engineering, procurement and construction services.
Maintenance and Industrial Services
The Maintenance and Industrial Services division
specialises in the planning, management and execution
of mechanical and electrical maintenance services,
shutdowns, fixed plant maintenance services, access
solutions, specialist coatings and sustaining capital works.
Monadelphous employee using a rail grinder to smooth out an on-track weld outside
Karratha, Western Australia.
Monadelphous Group Limited | Overview | 3
OUR SERVICES
AND LOCATIONS
Monadelphous operates predominantly
in Australia, with overseas operations
in New Zealand, China, Papua New
Guinea, Mongolia, the United States
and the Philippines.
UNITED STATES
13
HOUSTON
ENGINEERING CONSTRUCTION
Market Sector
MAINTENANCE AND INDUSTRIAL SERVICES
Market Sector
Armidale Regional Council - D&C of pipeline, pump station and
associated works from Malpas Dam to Guyra Water Treatment Plant
Water
Australia Pacific LNG - Supply, fabrication and assembly of
wellhead separator skids
Fabrication
Services
BHP - South Flank Project - SMPE&I works associated with
inflow infrastructure
BHP - South Flank Project - SMPE&I works associated with
outflow infrastructure
BHP - Various SMPE&I integrated packages
Iron Ore
Iron Ore
Iron Ore
CWP Asset Management - Crudine Ridge Wind Farm - Balance
of plant works
Renewable
Energy
Fortescue Metals Group - Crane services
Iron Ore
Galaxy Lithium Australia - DEC and upgrade work at Mt Cattlin mine Lithium
Goldwind Australia - Moorabool North Wind Farm - Balance of
plant works
Goldwind Australia - Moorabool South Wind Farm - Balance of
plant works
Renewable
Energy
Renewable
Energy
1
2
3
4
5
6
7
8
9
AngloGold Ashanti - Maintenance works
BHP Hunter Valley Energy Coal - Mount Arthur Coal - Shutdown
maintenance and minor projects
BHP Iron Ore - General maintenance services for shutdowns,
outages and minor capital works
BHP Mitsubishi Alliance (BMA) Blackwater Mine -
Dragline shutdowns
BHP Nickel West - Maintenance and turnarounds
BHP Olympic Dam - Maintenance and turnarounds
Gold
Coal
Iron Ore
Coal
Nickel
Copper,
Uranium,
Gold, Silver
Chevron Australia - Gorgon Project - LNG facilities maintenance
Oil and Gas
Fortescue Metals Group - Abrasive, cleaning and relining
carbon steel ore wagons
Glencore - Maintenance and dragline shutdowns
Iron Ore
Coal
10 Incitec Pivot Limited - General mechanical contractor services
Ammonia
11 INPEX Operations Australia Pty Ltd - Offshore maintenance services Oil and Gas
Hunter Water Corporation - Complex Capital Works Design and
Construct Panel
Water
12 Lihir Gold - Maintenance works
1
2
3
4
5
6
7
8
9
10
11
12
Gold
Gold
13
Newmont Goldcorp Boddington - Mechanical shutdown services
and tank maintenance and refurbishments
14 Oil Search Limited - Field construction and EPC services
Oil and Gas
15 Queensland Alumina Limited - Maintenance and projects
16 Rio Tinto Iron Ore - Maintenance and turnarounds
Alumina
Iron Ore
17 Shell’s Prelude FLNG facility - Maintenance and turnarounds
Oil and Gas
18
19
20
Shell’s QGC LNG Plant on Curtis Island - Maintenance and
shutdown services
Oil and Gas
South32 - Worsley Alumina Refinery - Shutdown and
mechanical services
Synergy - Operation and maintenance of Collie Basin Coal
Plant Infrastructure
Alumina
Power
21 Tronox KMK - Cogeneration Plant operation and maintenance
Power
22 Woodside - Karratha Gas Plant Life Extension Program
Oil and Gas
23
Woodside - Maintenance, turnarounds and offshore
brownfields implementation
Oil and Gas
JKC - Ichthys Project Onshore LNG Facilities - SMPE&I for
completion of gas turbine generators and associated steam piping
of combined cycle power plant
13 Kiewit Corporation - Structural steel
Oil and Gas
Fabrication
Services
14 Kurow Duntroon Irrigation Company - D&C of piped irrigation scheme Water
15
16
17
18
19
20
Lal Lal Wind Farms - EPC and commissioning of balance of
plant works
Renewable
Energy
Oyu Tolgoi LLC - Oyu Tolgoi Underground Project - Shaft 2
Surface Facilities - Structural, mechanical, piping and electrical
and instrumentation construction
Copper, Gold
Oyu Tolgoi LLC - Oyu Tolgoi Underground Project - Supply and
fabrication of structural steelwork
Fabrication
Services
Pukaki Irrigation Company Limited - Gravity pressurised
irrigation scheme
Water
Santos Ltd - Supply, fabrication and assembly of wellhead
separator skids
Fabrication
Services
Sydney Water - Facilities and network panel, desilting and
rehabilitation works
Water
21 Talison Lithium - D&C of new tailings retreatment processing plant Lithium
22 Townsville City Council - Upgrade to Cleveland Bay Purification Plant Water
23 Unitywater - Upgrade to Kawana Sewage Treatment Plant
Water
24
25
Vestas - Australian Wind Technology - Cherry Tree Wind Farm -
EPC balance of plant works
Renewable
Energy
Vestas - Australian Wind Technology - Dundonnell Wind Farm -
Balance of plant works
Renewable
Energy
4 | Monadelphous Group Limited | Annual Report 2019
16 17
MONGOLIA
ULAANBAATAR
2
13
17 19
BEIJING
CHINA
PHILIPPINES
MANILA
12
14
PAPUA NEW GUINEA
DARWIN
12
11 17
PORT HEDLAND
PILBARA COASTAL
AND NORTH-WEST REGION
3
3
22 23
7 16
5 7
4
KARRATHA
TOM PRICE
NEWMAN
8
7
KALGOORLIE
PERTH
HEAD OFFICE
5
1
5
21
13 19 20
21
8
BUNBURY
OFFICE AND WORKSHOP LOCATIONS
ENGINEERING CONSTRUCTION
MAINTENANCE & INDUSTRIAL SERVICES
AUSTRALIA
6
ROXBY DOWNS
24
9
10
15
25
22
4
10
MACKAY
15 18
GLADSTONE
2 19
23
BRISBANE
CHINCHILLA
GUNNEDAH
MUSWELLBROOK
MT THORLEY
NEWCASTLE
SYDNEY
MUDGEE
1
6
2
9
11
20
NEW ZEALAND
CHRISTCHURCH
18
17
14
Monadelphous Group Limited | Overview | 5
2018/19 HIGHLIGHTS
Monadelphous continued to make good progress in its markets and growth
strategy to maximise returns from core markets, build an infrastructure business
and deliver core services to overseas markets.
Record Revenue
in Maintenance &
Industrial Services
Record annual revenue
performance for the
division, as activity levels
grew in the iron ore and
oil and gas markets.
Shell’s Prelude FLNG Facility.
Strengthened Position in
Infrastructure Sector
Growth in revenue in both
water and renewable energy
markets. Zenviron secured three
new contracts, including the
Moorabool South, Dundonnell
and Cherry Tree wind farms.
6 | Monadelphous Group Limited | Annual Report 2019
Secured Major Maintenance
Contract in Pilbara
Secured a major three-
year contract with BHP
for provision of general
maintenance services
in the Pilbara, valued at
approximately $240 million.
Award of Major Resources
Construction Contracts
Awarded two new contracts with
BHP for the South Flank project and,
post year-end, secured contracts with
Rio Tinto at its West Angelas iron ore
mine and at Albemarle Lithium’s new
Kemerton lithium hydroxide plant.
Monadelphous secured
new contracts and
additional work valued
at approximately
$1.35 billion since
the beginning of the
2019 financial year.
Largest Ever Project Completed
Successfully completed work on the
Company’s largest ever construction project
at the INPEX-operated Ichthys Project
Onshore LNG Facilities in Darwin, Northern
Territory. Strong performance resulted in
the award of additional work and enabled
the Company to broaden its experience
and showcase its execution capabilities
to potential new oil and gas customers.
Mondium Secured Largest
Contract to Date
Mondium continued to establish
itself as a safe and reliable
EPC service provider and was
awarded its largest contract to
date, valued at approximately
$100 million, with Talison
Lithium at its Greenbushes mine
site in Western Australia.
Diversity and Inclusion
Monadelphous’ Gender Diversity and
Inclusion Plan 2018-2020 formalised
its commitment to this important
initiative. Solid progress was made in
achieving the Indigenous engagement
targets set in the Company’s Stretch
Reconciliation Action Plan 2017-2020.
Monadelphous Innovation Framework
A range of innovative solutions
were developed and implemented
across the business applying the
Monadelphous Innovation Framework,
which provides strategic direction
and governance structures to focus
the Company’s productivity and
innovation activities.
Image copyright © Rio Tinto 2019.
Oyu Tolgoi Underground Project in Mongolia
Good progress was made at the Oyu Tolgoi
Underground Project in Mongolia, with the project
workforce peaking at around 1,500 during the year.
Strong Focus on Safety
Continued focus on improving safety performance and
implementing key initiatives, including a revised safety leadership
program and the launch of a safety behavioural standard
framework to support a strong and sustainable safety culture.
Monadelphous Group Limited | Operating and Financial Review | 7
PERFORMANCE
AT A GLANCE
$1,608.3
REVENUE*
N
O
I
L
L
I
M
UNDERLYING NET
PROFIT AFTER TAX#
N
O
I
L
L
I
M
$57.4
UNDERLYING
EARNINGS PER SHARE#
61.0
S
T
N
E
C
FULL YEAR DIVIDEND
48.0
S
T
N
E
C
CONTRACTS SECURED SINCE
BEGINNING OF 2019 FINANCIAL YEAR
$1.35 B
N
O
I
L
L
I
8 | Monadelphous Group Limited | Annual Report 2019
Galaxy Lithium’s Mt Cattlin lithium mine,
Ravensthorpe, Western Australia.
Operations
Safety and Wellbeing
People and Culture
· Maintenance and Industrial
· Safety performance impacted by
· Ongoing focus on attraction
Services division achieved record
revenue result
· Secured new contracts and contract
extensions valued at approximately
$1.35 billion since beginning of
2019 financial year
· Awarded major resources
construction contracts as favourable
market conditions return
· Strengthened position in infrastructure
· Broadened service offering
and expanded geographically
·
Innovation Framework applied with
several key initiatives implemented
to improve safety and productivity
increase in subcontractor numbers
and rapid mobilisation to support
growth in maintenance activity
and retention of key talent as
employment market tightens
· Workforce totalled 7,091 at year-
· Safety initiatives implemented to
end, with 5,942 directly employed
improve performance, with focus on
subcontractor management,
safety leadership and behaviours
· Maintenance and Industrial Services
division restructured to focus
management resources on safety
· Strategic diversification
internationally and into infrastructure
has seen substantial increase in
subcontractor numbers
·
Important initiatives implemented
in gender diversity and Indigenous
engagement
· Appointed new Non-Executive
Director, Sue Murphy AO
Revenue*
0
.
5
6
8
,
1
n
o
i
l
l
i
m
$
0
.
4
8
7
,
1
7
.
4
6
3
,
1
7
.
4
6
2
,
1
.
3
8
0
6
1
,
Net Profit After Tax#
Earnings Per Share#
8
.
5
0
1
n
o
i
l
l
i
m
$
0
.
7
6
6
.
7
5
5
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7
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9
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7
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0
1
6
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
Financial Year
Financial Year
Financial Year
Dividends Per Share
0
.
2
9
s
t
n
e
c
0
.
0
6
0
.
4
5
0
.
2
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8
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Cash
8
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$
9
.
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2
Workforce Numbers
6,532
4
6
1
,
6
7,545
7,091
8
2
8
,
5
2
4
9
,
5
0
.
4
6
1
e
l
p
o
e
p
4,905
4,547
6
3
5
,
4
8
3
4
,
4
15
16
17
18
19
15
16
17
18
19
15
16
17
18
19
Financial Year
Financial Year
Financial Year
Direct Employees
Subcontractors
Revenue by Geography
Revenue by End Customer
WA
QLD
OVERSEAS
NSW
NT
VIC
SA
52%
12%
11%
8%
8%
7%
2%
Oil and Gas
Iron ore
Infrastructure
Other Minerals
Coal
37%
23%
17%
14%
9%
* Includes Monadelphous’ share of joint venture revenue. Refer to reconciliation on page 16.
# Underlying Net Profit After Tax (NPAT) and Underlying Earnings Per Share (EPS) in FY19 exclude the impact of the Research and Development tax payment. FY19 reported NPAT was
$50.6 million and reported EPS was 53.7 cents per share. Refer to reconciliation on page 16.
The financial information contained in this section should be read in conjunction with the Financial Statements and accompanying notes. Financial Statements are prepared
in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards Board and other relevant standards, as outlined on page 65.
Monadelphous Group Limited | Operating and Financial Review | 9
MARKETS AND
GROWTH STRATEGY
Monadelphous will grow earnings by maximising returns from its core
markets, building its infrastructure business and delivering core services
to overseas markets.
Maximise returns from core markets
Progress
Priorities
· Awarded $500 million of new
· Capitalise on iron ore and
resources construction contracts
lithium opportunities
· Strengthened market position
in maintenance
·
Improve competitiveness in core
markets through innovation
· Mondium secured new major
EPC contract
· Expand EPC delivery
through Mondium
· Deliver broader range of services
to existing customers
Woodside-operated North Rankin Complex,
Western Australia. Image courtesy of Woodside.
Build an infrastructure business
Progress
Priorities
· Zenviron strengthened position
in renewable energy market
and secured several new wind
farm contracts
· Water business appointed to
Hunter Water Corporation Complex
Capital Works panel
· Grow water business in Australia
· Continue to successfully deliver
renewable energy projects
· Progress options to enter
other targeted Australian
infrastructure markets
Deliver core services to overseas markets
Progress
Priorities
· Good progress on Oyu Tolgoi
· Continue to assess opportunities
Underground Project work packages
in Mongolia
for further Oyu Tolgoi work
10 | Monadelphous Group Limited | Annual Report 2019
Zenviron project, the 228MW Lal Lal Wind Farm
located in the Moorabool Shire of Victoria.
Employees at the Monadelphous Registered Training
Organisation in Ulaanbaatar, Mongolia.
Monadelphous employees reviewing dragline shutdown activity at BMA’s Blackwater Coal Mine, Queensland.
CHAIRMAN’S
REPORT
Revenue for the year was
$1,608.3 million*, with growth
in maintenance and infrastructure,
and lower levels of resources
construction activity.
The continued growth in the Company’s maintenance
and infrastructure revenues was offset by the reduction in
resources construction activity levels. As foreshadowed at
the end of the previous year, the reduction was a result of
the timing of the award and commencement of new major
resources construction contracts, and the significant revenue
generated from the Ichthys project in the prior period.
Earnings before interest, tax, depreciation and amortisation
(EBITDA) was $106.8 million^, a reduction of 10.3 per cent
compared to the previous year.
During the year, the Company made a one-off provision
of approximately $7 million (net of tax) which impacted its
net profit after tax. The provision resulted from the receipt
of Notices of Amended Assessments from the Australian
Taxation Office relating to research and development tax
incentives claimed by the Company in 2015 and 2016,
which were prepared and lodged on the Company’s behalf
by independent tax advisors and were subsequently
deemed to be ineligible. Monadelphous has applied for
a review of these findings.
The Company’s plant and equipment fleet renewal program
over recent years resulted in an increased depreciation
charge for the year and, combined with a reduction in net
interest earned, contributed to an underlying net profit after
tax attributable to members (NPAT) of $57.4 million# and
reported NPAT of $50.6 million. Underlying earnings per
share (EPS) was 61 cents and reported EPS was 53.7 cents.
The Board of Directors declared a final dividend of
23 cents per share fully franked, taking the full-year
dividend to 48 cents per share fully franked, with a
dividend payout ratio of approximately 90 per cent of
reported NPAT. The Monadelphous Group Limited Dividend
Reinvestment Plan will apply to the final dividend.
The Company ended the year with a cash balance of
$164 million, a cash flow from operations of $16 million
and a cash flow conversion rate of 54 per cent.
* Includes Monadelphous’ share of joint venture revenue. Refer to reconciliation on page 16.
^ EBITDA - refer to reconciliation on page 16.
# Underlying - refer to reconciliation on page 16.
12 | Monadelphous Group Limited | Annual Report 2019
Cash reserves were affected by increased working capital
requirements across the business and a significant level
of employee entitlement payouts on large, multi-year
projects which demobilised during the year.
The Company’s balance sheet remains strong and provides
it with substantial capacity to invest in suitable new
business opportunities which may arise.
Pleasingly, new contracts and extensions valued at
approximately $1.35 billion were secured since the
beginning of the 2019 financial year, including a significant
number of major construction contracts in the resources
sector valued in excess of $500 million.
Monadelphous made good
progress in its markets and
growth strategy during the year.
The Company made good progress in its markets and
growth strategy to maximise returns from core markets,
build an infrastructure business and deliver core services
to overseas markets, and successfully completed its work
at the Ichthys Project Onshore LNG Facilities in Darwin,
Northern Territory, early in the year. Monadelphous’ strong
execution and safety performance throughout the project
resulted in the award of significant levels of complex
additional work and enabled it to broaden its experience
in the oil and gas market and showcase its execution
capabilities to a number of potential new customers.
Activity levels in the Maintenance and Industrial Services
division were high as the Company experienced increased
levels of demand for sustaining capital works and shutdown
services in the resources sector, as well as significant
growth in activity in its offshore oil and gas contracts.
During the year Mondium, the Company’s engineering,
procurement and construction (EPC) service provider,
was awarded its largest contract to date. This achievement
highlights its strengthening position in the minerals
processing EPC market.
The Company continued to build its strong reputation
for safe and quality service delivery in the infrastructure
market, securing new contracts and additional work in both
renewable energy and water during the year.
Zenviron, the Company’s renewable energy joint venture,
successfully completed work on two projects and secured
contracts for three additional wind farms. This took to
eight the total number of contracts secured since the
establishment of the joint venture in 2016.
Successful delivery in the water market led to
Monadelphous being appointed to the Hunter Water
Corporation Complex Capital Works Design and Construct
Panel, in New South Wales, for a four-year period, and
securing additional packages of work with Sydney Water.
Subsequent to year-end, the Company completed an
agreement to purchase the assets of iPipe Services, which
provides specialist services to the coal seam gas sector,
complementing Monadelphous’ existing services and
enabling further expansion of its core offering to customers.
Monadelphous continued to expand its broad range of
services to existing and new customers and diversify into
new geographical regions. It now provides services at
24 locations in seven countries – Australia, New Zealand,
Mongolia, China, Papua New Guinea, the United States
and the Philippines.
In June 2019 the Company appointed Ms Sue Murphy
AO, a civil engineer with 40 years’ experience in the
resources and infrastructure sectors, as an Independent
Non-Executive Director. Ms Murphy’s breadth of experience
in corporate governance, capital works development
and productivity improvement enhances Monadelphous’
capability, and further enables it to achieve its strategic
objectives and provide value for shareholders.
On behalf of the Board, I take this opportunity to thank our
talented and committed team of people for their loyalty and
highly valued contribution, and our shareholders and other
stakeholders for their ongoing support.
John Rubino
Chairman
Monadelphous 600 tonne crawler crane preparing to undertake a turnaround
at the Woodside-operated Pluto LNG Facility.
Monadelphous Group Limited | Operating and Financial Review | 13
MANAGING DIRECTOR’S
REPORT
Monadelphous was awarded
approximately $1.35 billion in new
contracts and contract extensions since
the beginning of the 2019 financial year,
including approximately $400 million
of new contracts subsequent to year-
end, kicking off a promising start to
the 2020 financial year.
The Maintenance and Industrial Services division achieved
a record annual revenue performance for the year ended
30 June 2019, as continued growth in oil and gas activity
levels coincided with strong demand for its services in
the resources sector. While activity levels in the resources
construction market were subdued, the Company strengthened
its position in infrastructure, with revenue growth achieved
in both the water and renewable energy markets.
The ongoing growth and diversification of the business,
both internationally and into the infrastructure sector,
generated a substantial increase in the number of
subcontractors engaged to supplement the Company’s
capability. At year-end, the Company’s total workforce,
including subcontractors, was 7,091, with 5,942
direct employees.
Monadelphous’ ability to attract and retain talent
remained a focus, with talent management, succession
planning and development activities critical to ensuring
the required level of skills and capabilities. With more
than 80 graduate employees in a range of disciplines in
its Graduate Development Program, the Company has a
suite of employee development and leadership programs to
develop and retain its talented people. Pleasingly, key talent
retention levels remained high during the year.
The rapid mobilisation of resources required to support
increased maintenance activity levels, along with growing
subcontractor numbers, impacted the Company’s safety
performance for the year, with the 12-month total recordable
injury frequency rate (TRIFR) increasing to 4.02 incidents
per million man-hours worked. Action was taken to address
the disappointing performance trend, including improved
subcontractor management practices, a revised safety
leadership development program, and the launch of a safety
behavioural standard framework to support a strong and
sustainable safety culture.
* Includes Monadelphous’ share of joint venture revenue.
14 | Monadelphous Group Limited | Annual Report 2019
Engineering Construction
The Engineering Construction division reported revenue
of $622.9 million*, down about a third on the previous
year, reflecting subdued activity levels in the resources
construction market, offset by growth in the renewable
energy and water businesses.
Since the beginning of the 2019 financial year,
the division secured new contracts valued at approximately
$850 million. With renewed confidence in the resources
sector, the division secured two major construction contracts
with BHP at its South Flank Project in the Pilbara region of
Western Australia. Post year-end, new major construction
contracts were secured at Rio Tinto’s West Angelas C and D
Deposits Project in the Pilbara region, Albemarle Lithium’s
new Kemerton lithium hydroxide plant in the south-west of
Western Australia, and Origin’s Talinga Orana Gas Gathering
Station located near Chinchilla in Queensland.
Monadelphous remains
in good shape to deal
with the opportunities
and challenges ahead.
The division strengthened its position in the infrastructure
sector, with Zenviron securing three new wind farm contracts,
valued at approximately $190 million and making good
progress on the projects secured in the prior period.
Mondium was awarded its largest contract to date, valued
at approximately $100 million, for a new tailings retreatment
processing plant at Talison Lithium’s Greenbushes mine site
in Western Australia, and the division continued to make
good progress on work at the Oyu Tolgoi Underground
Project in Mongolia.
The Company’s heavy lift business expanded its services
and extended its customer base, and SinoStruct, the
Company’s China-based fabrication business, continued
to supply fabricated product and procurement services
to both internal and external customers.
An unrelenting commitment to improving safety
performance and strengthening safety culture resulted
in a strong safety performance in resources construction.
Maintenance and Industrial Services
The Maintenance and Industrial Services division achieved
a record annual revenue performance of $998.4 million,
up 19 per cent, as it continued to broaden the range
of services offered to existing and new customers,
and expanded its presence geographically. The strong
performance was the result of increased demand for
the division’s services across all markets.
The division continued to perform strongly on its
long-term oil and gas maintenance services contracts
and experienced increased activity levels as two large
offshore projects – Shell’s Prelude FLNG (floating liquefied
natural gas) facility and the INPEX-operated Ichthys LNG
processing facilities – were commissioned.
Significant levels of sustaining capital and additional
shutdown works were experienced in the resources sector.
The division continued to actively build capability to support
expansion in sustaining capital works and smaller brownfields
projects, particularly in the Pilbara region of Western
Australia. The commitment to regional workshops located
close to customer operations was extended, along with
the scope of support activities, such as rope access, non-
destructive testing and ultra-high-pressure jetting services.
Approximately $500 million of new contracts and contract
extensions were secured since the beginning of the 2019
financial year, including a major three-year contract with
BHP for general maintenance services in the Pilbara region.
Subsequent to year-end, the division secured a three-year
contract, with two three-year extension options, with Rio
Tinto for the provision of services on its privately-owned rail
network in the Pilbara region, strengthening Monadelphous’
position in the rail sector.
Mobilisations and total man-hours reached record levels
during the year, and the division continued to invest in
robust safety initiatives and programs. Following the
substantial increase in activity, and to facilitate the
appropriate governance and management structures
to deliver on its strategy, a divisional restructure was
undertaken to best position it for future growth, ensuring
the capabilities of each business unit remain aligned with
customer requirements.
Innovation and business improvement continued to be
major focus areas, with the rollout of LEAN methodology
and the continued work of dedicated innovation teams
across the division.
Outlook
The resources and energy sectors in Australia are expected
to provide a solid pipeline of opportunities over coming
years as more favourable market conditions return.
Project development activity has been increasing with
a number of resources construction opportunities coming
to market, particularly in the iron ore and lithium sectors.
Prospects from further development in LNG production
are also expected to be positive in coming years.
Maintenance activity in the resources market is expected
to be strong as production levels in Australia remain at
record levels. Customer focus on optimising production and
increasing productivity levels will continue to drive demand
for ongoing maintenance support and sustaining capital work.
Investment in infrastructure remains healthy, and with the
Company’s reputation for safe and quality project delivery
in this market, prospects in both water and renewables will
continue to provide opportunities.
Monadelphous has been awarded a significant number
of new major construction and maintenance contracts
since the beginning of the 2019 calendar year and, with
its strong reputation across a broadening service offering,
is in a good position to secure further work.
A number of construction opportunities, however, are
coming to market and advancing to execution later than
expected. While growth prospects over the longer-term
are positive, revenue for the 2019/20 financial year
will be dependent on the timing of execution of work
recently secured, as well as the value and timing of future
successful awards of additional resources construction
contracts. High levels of competition, price sensitivity
and customer expectations for cost competitive delivery
will drive demand for productivity improvements and
continue to challenge margins.
As always, the attraction and retention of high performing
talent is a key priority for the Company. The expected
increase in industry activity is likely to lead to further
pressure in the employment market and present challenges
with respect to the attraction and retention of labour.
In summary, Monadelphous remains in good shape to deal
with the opportunities and challenges ahead.
Rob Velletri
Managing Director
Monadelphous Group Limited | Operating and Financial Review | 15
COMPANY PERFORMANCE
A review of the Company’s performance over the last five years is as follows:
Statutory Revenue
EBITDA
Profit before income tax expense
Income tax expense
Profit after income tax expense attributable to equity
holders of the parent
Basic earnings per share (cents)
Interim dividends per share (fully franked) (cents)
Final dividends per share (fully franked) (cents)
2019
$’000
1,479,737
106,791
83,426
31,313
2018
$’000
1,737,632
119,046
102,845
30,570
2017
$’000
1,249,085
2016
$’000
1,368,849
2015
$’000
1,869,505
98,184
82,664
24,144
113,630
95,610
28,702
50,565
71,479
57,563
67,014
53.72
25.00
23.00
76.11
30.00
32.00
61.41
24.00
30.00
71.77
28.00
32.00
Net tangible asset backing per share (cents)
413.93
415.86
398.23
390.64
Total equity and reserves attributable to equity holders
of the parent
Depreciation
Debt to equity ratio %
Return on equity %
EBITDA margin %
393,436
19,490
394,481
17,222
377,393
17,892
368,995
21,094
9.7
12.9
6.6
5.3
18.1
6.7
3.6
15.3
7.8
4.8
18.2
8.3
167,975
147,041
41,216
105,825
113.91
46.00
46.00
391.75
368,098
22,932
6.3
28.7
9.0
The comparative information has not been restated following the adoption of AASB 15 and continues to be reported under the previous
accounting policy. Refer to note 31 to the financial statements for further details.
EBITDA is a non-IFRS earnings measure which does not have any standardised meaning prescribed by IFRS and therefore
may not be comparable to EBITDA presented by other companies. This measure, which is unaudited, is important to
management as an additional way to evaluate the Company’s performance.
Reconciliation of Profit Before Income Tax to EBITDA (Unaudited):
Profit before income tax
Interest expense
Interest revenue
Depreciation expense
Amortisation expense
Share of interest, depreciation, amortisation and tax of joint ventures#
2019
$’000
83,426
1,930
(2,269)
19,490
1,306
2,908
2018
$’000
102,845
452
(2,573)
17,222
625
475
EBITDA
106,791
119,046
Revenue including joint ventures is a non-IFRS measure which does not have any standardised meaning prescribed by
IFRS and therefore may not be comparable to revenue presented by other companies. This measure, which is unaudited,
is important to management when used as an additional means to evaluate the Company’s performance.
Reconciliation of Statutory Revenue from Contracts with Customers (Unaudited):
Total revenue from contracts with customers including joint ventures
Share of revenue from joint ventures~
Statutory revenue from contracts with customers
Reconciliation of Net Profit After Income Tax to Underlying
Net Profit After Income Tax (Unaudited):
Net profit after tax attributable to members
Research and development tax repayment*
Underlying net profit after tax attributable to members
2019
$’000
2018
$’000
1,608,277
1,783,999
(131,008)
(49,118)
1,477,269
1,734,881
2019
$’000
50,565
6,884
57,449
2018
$’000
71,479
-
71,479
# Represents Monadelphous’ proportionate share of the interest, depreciation, amortisation and tax of joint ventures accounted for using the equity method.
~ Represents Monadelphous’ proportionate share of the revenue of joint ventures accounted for using the equity method.
* During the period, the Company made a one-off provision of approximately $7 million (net of tax) which impacted its net profit after tax. The provision resulted from the receipt of
Notices of Amended Assessments from the Australian Taxation Office relating to the 2015 and 2016 income years. The amended assessments relate to Research and Development tax
incentives claimed by the Company in those years which were subsequently deemed to be ineligible.
16 | Monadelphous Group Limited | Annual Report 2019
Monadelphous all-terrain crane and employees working at the Woodside-operated Karratha Gas Plant, Western Australia.
BOARD OF
DIRECTORS
Left to right: Helen Gillies, Dietmar Voss, John Rubino, Chris Michelmore, Rob Velletri, Peter Dempsey, Sue Murphy AO.
John Rubino
Chairman
John was appointed to the Board on 18 January 1991. John was the founder
of United Construction which later became diversified services company UGL.
Initially serving as Managing Director and Chairman of Monadelphous Group
Limited, John resigned as Managing Director on 30 May 2003 and continued
as Chairman. John has 53 years of experience in the construction and
engineering services industry.
Rob Velletri
Managing Director
Rob was appointed to the Board on 26 August 1992 and commenced as
Managing Director on 30 May 2003. He joined Monadelphous in 1989 as
General Manager after serving a 10 year career in engineering and management
roles at Alcoa. Rob is a mechanical engineer with 40 years of experience in the
construction and engineering services industry and is a Corporate Member of
the Institution of Engineers Australia.
18 | Monadelphous Group Limited | Annual Report 2019
Peter Dempsey
Lead Independent Non-Executive Director
Peter was appointed to the Board on 30 May 2003. During his 30 year career
at Baulderstone, now part of the multinational group Lendlease, Peter held
several management positions prior to serving as Managing Director for five
years. He is a civil engineer with 47 years of experience in the construction
and engineering services industry throughout Australia, Papua New Guinea,
Indonesia and Vietnam. Peter is a Fellow of the Institution of Engineers Australia
and a member of the Australian Institute of Company Directors. Peter is also
currently a Director of Service Stream Limited (ASX: SSM).
Helen Gillies
Independent Non-Executive Director
Helen was appointed to the Board on 5 September 2016 and has previously
served as a Director of global engineering company Sinclair Knight Merz and the
Australian Civil Aviation Safety Authority. She has a strong background in risk,
law, governance and finance, as well as extensive experience in mergers and
acquisitions, and has 23 years of experience in the construction and engineering
services industry. Helen holds a Master of Business Administration and a Master
of Construction Law, as well as degrees in commerce and law. She is a Fellow of
the Australian Institute of Company Directors. Helen is also currently a Director
of Yancoal Australia Limited (ASX: YAL).
Chris Michelmore
Independent Non-Executive Director
Chris was appointed to the Board on 1 October 2007. He was formerly a
Director of Connell Wagner, having served 36 years with the company, which
now trades globally as Aurecon. Chris is a civil and structural engineer with
47 years of experience in the construction and engineering services industry
throughout Australia, South East Asia and the Middle East. Chris is a Fellow
of the Institution of Engineers Australia.
Sue Murphy AO
Independent Non-Executive Director
Sue was appointed to the Board on 11 June 2019. During her 25 year career
at Clough, she held a wide range of operational and leadership roles before being
appointed to the Board as a Director in 1998. Sue joined the Water Corporation
of Western Australia in 2004 as General Manager of Planning and Infrastructure,
before being appointed as Chief Executive Officer, a role she held for over a
decade. Sue holds a Bachelor of Civil Engineering and is an Honorary Fellow
of the Institution of Engineers Australia.
Dietmar Voss
Independent Non-Executive Director
Dietmar was appointed to the Board on 10 March 2014. During his career,
Dietmar has worked for a number of global mining and engineering businesses,
including BHP, Bechtel and Hatch throughout Australia, the United States,
Europe, the Middle East and Africa. He is a chemical engineer with 45 years of
experience in the oil and gas, and mining and minerals industries. Dietmar holds
a Master of Business Administration in addition to science and law degrees and
is a member of the Australian Institute of Company Directors.
Monadelphous Group Limited | Operating and Financial Review | 19
ENGINEERING
CONSTRUCTION
Our Progress
Secured new contracts valued at
approximately $850 million since
beginning of 2019 financial year
Growth in infrastructure business
Mondium secured largest contract
to date
20 | Monadelphous Group Limited | Annual Report 2019
600 tonne crawler crane in superlift, complete with luffer, undertaking flare refurbishment works at the Woodside-operated Pluto LNG Facility.
The Engineering Construction division provides large-scale multidisciplinary
project management and construction services.
Engineering Construction
The division reported revenue of $622.9 million*, down
about a third on the previous year, reflecting subdued
resources construction activity during the period, offset
by growth in the renewable energy and water businesses.
Since the beginning of the financial year, the division secured
new contracts valued at approximately $850 million.
In a year of consolidation, the division worked diligently
to execute its strategic objectives, strengthening its position
in core markets whilst continuing growth strategies
in expansion markets. Recognising the potential upturn
in market activity, strategies have been implemented
to support the increased employee requirements,
and expected plant and equipment demands.
Monadelphous’ proven track record for reliably and
safely delivering large-scale multidisciplinary construction
projects in the iron ore market culminated with the award
of two major construction contracts at BHP’s South
Flank Project in the Pilbara region of Western Australia.
The multidisciplinary contracts, which are valued in
excess of $200 million in aggregate, are associated
with the construction of the project’s inflow and outflow
infrastructure, and will provide local employment and
supply opportunities.
Post the reporting period, two additional multidisciplinary
contracts were secured in Western Australia, at Rio Tinto’s
West Angelas project in the Pilbara and at Albemarle
Lithium’s new Kemerton lithium hydroxide plant in the
south-west.
During the year, Mondium also secured a major design
and construction contract at Talison Lithium’s Greenbushes
operations in the south-west region of Western Australia,
valued at approximately $100 million.
The division saw increased activity in the infrastructure
business, with growth in both water and renewable
energy. Zenviron continues to go from strength to strength,
successfully executing works on a number of projects,
and securing three additional wind farm contracts during
the year. The water business’ strong reputation for
successful delivery in the water market led to it being
appointed to the Hunter Water Corporation Complex Capital
Works Design and Construct Panel and securing additional
packages of work with Sydney Water.
An unrelenting commitment to improving safety performance
and strengthening safety culture was maintained throughout
the year, resulting in a strong safety performance in resources
construction, bettering target for the second successive year.
Health, safety and environment (HSE) initiatives included
the implementation of the Company’s Safety Leadership
Development Program (Leading the Safe Way), an improved
approach to working with subcontractors, the leveraging
of in-field technology to ensure continued high standards,
and the real-time collation of results to support targeted
safety campaigns. In Mongolia, to enable positive HSE
performance in a complex environment, a tailored high risk
work training package was developed and implemented to
support workers at the Oyu Tolgoi Underground Project.
Resources
Several projects were carried out during the year under the
BHP Western Australian Iron Ore panel agreement for the
provision of structural, mechanical, piping and electrical
and instrumentation works in the Pilbara, which provides
the division with a strong pipeline of project opportunities.
The division continued to make good progress on the two
packages currently being undertaken at the Oyu Tolgoi
Underground Project in Mongolia, which reached a peak
workforce of around 1,500 during the year. Existing
contracts are scheduled for completion in 2020, and
further opportunities will be assessed on this project
as they come to market.
Energy
Encompassing approximately 8.5 million man-hours over
four years, the division successfully completed its works
on the INPEX-operated Ichthys Project Onshore LNG
Facilities, early in the period.
Subsequent to the end of the financial year, the Company
secured a contract with Origin for the construction of
the Talinga Orana Gas Gathering Station near Chinchilla,
Queensland. The contract includes the procurement,
fabrication, preassembly and site construction of two
gas compression trains and supporting utilities and
infrastructure and broadens the division’s experience
in the growing coal seam gas market. The project is
expected to be completed by March 2020.
Infrastructure
Activity remained high during the year in the infrastructure
markets of water and renewable energy.
Monadelphous was appointed to the Hunter Water
Corporation Complex Capital Works Design and Construct
Panel, in the Hunter region of New South Wales.
The appointment, for an initial term of four years, with
two one-year extension options, includes the upgrade and
renewal of water, wastewater and recycled water systems.
The Company secured its first package of work under the
program during the year for the provision of a filter to waste
system, a chemical systems upgrade and replacement
of existing electrical switchboards at the Dungog Water
Treatment Plant.
* Includes Monadelphous’ share of joint venture revenue.
Monadelphous Group Limited | Operating and Financial Review | 21
Work continued on Sydney Water’s Network and Facilities
Renewals Program, which has been in operation since
2013. This included the award of an additional package of
work to provide desilting and rehabilitation on the Northern
Suburbs Ocean Outfall Sewer during the year.
A new design and construction contract was secured for an
18 kilometre pipeline, pump station and associated works
from Malpas Dam to the Guyra Water Treatment Plant for
Armidale Regional Council in New South Wales. In New
Zealand’s South Island, the Pukaki Irrigation Project was
completed, and work commenced on a new design and
construct contract for a similar piped irrigation scheme for
the Kurow Duntroon Irrigation Company. In Queensland,
construction continued on the Kawana Sewage Treatment
Plant and the Cleveland Bay Purification Plant.
CASE STUDY
Mondium’s work with Talison Lithium
Talison Lithium Pty Ltd (Talison) mines and produces
lithium minerals at its Greenbushes operations
situated in the south-west of Western Australia.
Talison is expanding its Greenbushes operations
with the construction of additional chemical grade
lithium processing facilities and the construction
of a tailings retreatment facility. During the year,
Monadelphous’ EPC business, Mondium, secured
a contract valued at approximately $100 million,
for the design and construction of the new tailings
retreatment facility. Project execution is progressing
well and is scheduled for completion in late 2020.
Zenviron
Zenviron continues to strengthen its position in the
renewable energy market across Australia, successfully
completing the Sapphire Wind Farm in New South Wales,
and the Salt Creek Wind Farm in Victoria.
Three new contracts were secured during the year, valued
at approximately $190 million in total. These included two
balance of plant contracts for Vestas – Australian Wind
Technology in Victoria, at the Dundonnell Wind Farm near
Mortlake, valued at approximately $100 million, and an
EPC contract for works on the Cherry Tree Wind Farm,
near Seymour.
Zenviron also secured the balance of plant works for the
southern section of Moorabool Wind Farm, near Ballan,
Victoria, for Goldwind Australia, which is in addition to
the contract for the northern section secured in the prior
year, taking the total contract works on the project to
approximately $130 million.
Heavy Lift
The Company’s heavy lift business continued to grow its
services and extend its customer base through the year,
following the opening in the prior year of the strategically
important Heavy Lift Operations Centre in Port Hedland,
ideally located to service Western Australia’s resources
and energy hubs in the Pilbara region.
The business continued to supply fixed plant maintenance
and shutdown crane services for Fortescue Metals Group
at the Solomon Hub in the Pilbara region of Western
Australia and subsequent to year-end, expanded those
services to include heavy mobile equipment works.
The business also secured a crane services contract,
in association with the Maintenance and Industrial Services
division, to the Woodside-operated Karratha Gas Plant,
Pluto LNG Facility and King Bay Supply Base in the
Pilbara, Western Australia.
The Pukaki Irrigation Scheme located in the Mackenzie Basin, New Zealand.
22 | Monadelphous Group Limited | Annual Report 2019
Talison Lithium’s Greenbushes Operations, Western Australia.
Fabrication Services
SinoStruct, the Company’s China-based fabrication
business, continued to perform strongly, supplying
fabricated product and procurement services to internal
and external customers.
Monadelphous’ internal construction requirements continue
to underpin the SinoStruct business. High levels of repeat
business were maintained, with the business securing
orders for the supply of wellhead skids to Santos and
Australia Pacific LNG for their upstream coal seam gas
developments in Queensland.
Internationally, SinoStruct completed works on large projects
in North America and received orders for fabrication work
associated with the Oyu Tolgoi Underground Project in
Mongolia. Activity continued to increase at the Houston
workshop as the Company establishes a presence and
reputation in the US oil and gas market.
Outlook
Tendering activity increased, and the renewed strength
of the resources and energy sectors is expected to
provide a solid pipeline of construction opportunities in
the division’s core markets, particularly in iron ore and
lithium. Investment in infrastructure remains healthy,
and with the Company’s reputation for safe and quality
project delivery in this market, prospects in both the
water and renewable energy markets will continue to
provide opportunities. Operations in Mongolia and China
will remain strategically important.
Mondium’s growing capability will increase its opportunities
on larger and more complex projects.
Hunter Water’s Dungog Wastewater Treatment Plant in New South Wales.
Monadelphous Group Limited | Operating and Financial Review | 23
MAINTENANCE AND
INDUSTRIAL SERVICES
Our Progress
Record annual revenue performance,
up 19 per cent on prior year
Secured more than $500 million of
new contracts and extensions since
beginning of 2019 financial year
Continued to offer broadened range of
services and expanded geographically
24 | Monadelphous Group Limited | Annual Report 2019
Monadelphous employee assisting with an isolation at the Woodside-operated Karratha Gas Plant.
The Maintenance and Industrial Services division specialises in the
planning, management and execution of multidisciplinary maintenance
services, sustaining capital works and turnarounds.
The division achieved a record annual revenue performance
for the year of $998.4 million, up 19 per cent on the
prior period. It continued to broaden the range of services
delivered to existing and new customers and expanded its
presence into a number of new geographical regions.
Substantial effort was made to further build capability
in support of the division’s expansion in sustaining capital
works, predominantly in the resources sector in the Pilbara
region of Western Australia, and to expand in the smaller
brownfields projects market.
The strong performance reflected increased demand for
the division’s services across all markets, as activity levels
increased in the oil and gas market, and with significant
levels of sustaining capital and additional shutdown works
experienced in the resources sector.
A divisional restructure was undertaken during the year,
following the substantial increase in activity over recent
periods, to facilitate the appropriate governance and
management structure required to deliver on its strategy.
The new structure ensures the capabilities of each business
unit remain aligned with customer requirements, and ensure
appropriate levels of leadership and management.
The division broadened the scope of support activities
provided on the east coast of Australia, with rope access
and non-destructive testing services now offered to
customers nationally. Ultra-high-pressure jetting capability
was also embedded across the division to further broaden
its service offering.
More than $500 million of new contracts and contract
extensions were secured since the beginning of the
2019 financial year, including a major three-year general
maintenance services contract with BHP in the Pilbara.
The division continued to invest in robust safety initiatives
and programs, as mobilisations and total man-hours
reached record levels, more than 16 per cent higher than
the previous year. Initiatives included business unit-specific
planning for the effective management of market and
regional differences, and a reinvigorated Leading the Safe
Way leadership development program.
Innovation and business improvement remained a strategic
focus, as the division identified and implemented a range of
innovation initiatives including the provisional patenting and
commercialisation of a robotic inspection vehicle, investment
in 4D visualisation software, delivery of an integrated
maintenance shutdown model and increased deployment
of in-field mobile devices.
Shell’s Prelude FLNG (Floating Liquefied Natural Gas) Facility, Western Australia.
Monadelphous Group Limited | Operating and Financial Review | 25
Energy
Activity increased in onshore and offshore oil and
gas maintenance work at the Woodside-operated gas
production facilities in the Pilbara region of Western
Australia, Shell’s Prelude FLNG (floating liquefied natural
gas) facility and the INPEX-operated Ichthys LNG offshore
processing facilities, with both Prelude and Ichthys facilities
commissioned during the year. This increase in work saw
approximately 700 employees associated with offshore oil
and gas maintenance activity across the division at year-end.
Maintenance and shutdown services were delivered for
the Woodside-operated Karratha Gas Plant, along with
a major turnaround involving more than 500 personnel at
the Woodside-operated Pluto LNG facility. Monadelphous’
joint venture, MGJV, also completed mechanical, electrical,
access, coatings and insulation work on the Karratha Gas
Plant Life Extension Program. Maintenance and shutdown
services were also provided for Shell’s QGC LNG Plant
on Curtis Island, near Gladstone in Queensland, with
the division securing a one-year extension to its existing
contract during the year.
Monadelphous employee testing battery connections during an electrical inspection
at BHP’s Jimblebar mine, Western Australia.
26 | Monadelphous Group Limited | Annual Report 2019
Services including rope access and non-destructive testing,
corrosion management, specialist coatings and marine
management, along with the new ultra-high-pressure jetting,
were embedded into core offerings. A new workshop was
also opened at Chinchilla to support coal seam gas activities
in the region and become the division’s third service facility
in Queensland, alongside Mackay and Gladstone.
The division continued to provide EPC services to Oil Search
at the oil and gas production and support facilities in the
Highlands region of Papua New Guinea, in joint operation
with Worley. Monadelphous has provided brownfield project
and maintenance services to Oil Search since 2007.
Subsequent to year-end, Monadelphous completed
an agreement to purchase the assets of iPipe Services,
a provider of technology solutions, construction and
maintenance services to the coal seam gas sector in
Queensland. The specialist services provided by iPipe,
including nitrogen testing and leak detection and repair,
complement the division’s existing services, enabling
further expansion of its core offering to customers.
Resources
The division saw record levels of mobilisations, peak
manning and an increase in total man-hours in the Pilbara,
in support of a number of new contracts awarded during
the year.
The division secured a major contract with BHP for the
provision of general maintenance services for shutdowns,
outages and minor capital works, totalling approximately
$240 million over a three-year period, with an additional
two one-year extension options. The contract includes
work at BHP’s Mt Whaleback, Jimblebar, Eastern Ridge,
Mining Area C and Yandi mine sites in the Pilbara region
of Western Australia. To support the effective delivery of
this contract, and to enhance its reputation in the market
and commitment to the region, the Company purchased
a new workshop facility in Newman. It also enhanced its
capability in Tom Price with the expansion of its facility
and increased integration of services in Port Hedland
through collaboration with the Engineering Construction
division’s Heavy Lift Operations Centre.
Two new three-year contracts were secured with
Whitehaven Coal for the provision of mechanical services,
maintenance, shutdown support and minor projects in
New South Wales, and a new workshop was opened
at Mudgee to service the coal market.
In Queensland, a two-year extension to an existing
contract was secured with BHP Mitsubishi Alliance (BMA)
to provide dragline shutdown services in the Bowen Basin.
This followed major work performed for BMA on the
Shiploader 2 shutdown at the Hay Point Coal Terminal,
where the division ramped up safely at short notice and
significantly increased its on-site workforce to resource
additional works.
Conveyors at BHP’s Mining Area C in the Pilbara region of Western Australia.
Subsequent to year-end, the Company announced it had
secured an order to perform another major shutdown at the
Hay Point Coal Terminal for BMA in the first half of the 2020
financial year.
Also post year-end, the Company announced the
award of a number of new contracts with Rio Tinto,
including a three-year contract for the provision of
services on its privately-owned rail network in the Pilbara
region of Western Australia, valued at approximately
$60 million, with a further two three-year extension
options, strengthening its position in the rail sector. Other
work awarded included a three-year contract to provide
rope access and tank inspection services at Rio Tinto’s
Yarwun alumina refinery near Gladstone, Queensland,
and a contract for the refurbishment of the high-grade
screenhouse at Tom Price mine in Western Australia.
The division continued to deliver to customers in the south-
west region of Western Australia with mechanical shutdown
services, tank maintenance and refurbishments completed
for Newmont Goldcorp in Boddington, and operation and
maintenance services delivered at the coal handling facility
at Muja Power Station for Synergy in Collie.
A major milestone was reached during the year with
Monadelphous celebrating three decades since it opened
its workshop in Roxby Downs, South Australia, to service
the nearby BHP Olympic Dam operation. At year-end,
the workshop employed around 180 people.
Outlook
Maintenance market activity is expected to remain strong,
with production ramping up on recently commissioned
LNG projects, and a requirement for ongoing sustaining
capital work on resources assets, amidst a background
of increased competition and tightening labour conditions.
CASE STUDY
General Maintenance Services Contract
BHP is a leading iron ore producer with an integrated
system of four processing hubs and five mines,
connected by more than 1,000 kilometres of rail
infrastructure and port facilities in the Pilbara region
of Western Australia.
During the year, BHP awarded Monadelphous a
major three-year contract for general maintenance
services in the Pilbara.
Monadelphous has a capable and flexible workforce,
delivering a wide scope of sustaining and minor
capital works for BHP and other iron ore producers.
With its reputation for delivering customer-focussed
and innovative solutions, Monadelphous will continue
to broaden its service offering and diversify to
meet the requirements of the iron ore market for
sustaining and minor capital works, including smaller
brownfields projects.
Monadelphous Group Limited | Operating and Financial Review | 27
SUSTAINABILITY
Our Progress
High level of key talent retention
Strong focus on safety
improvement initiatives
Launched Gender Diversity
and Inclusion Plan
28 | Monadelphous Group Limited | Annual Report 2019
Wind turbine at Lal Lal Wind Farm, in regional Victoria.
At Monadelphous, sustainability encompasses economic, environmental
and social activities across the Company, underpinned by a commitment
to the safety and wellbeing of its employees. Through the Company’s
commitment to supporting its customers in enhancing their social licence
to operate, Monadelphous endeavours to maintain a strong reputation built
on operating in a responsible way, by caring for the environment, its people
and communities.
Innovation and Productivity
Monadelphous is committed to the ongoing development
of new and improved operational and support methodologies,
practices and processes which enhance its competitive
position in the market and deliver high quality, safe,
value-adding services to improve the efficiency of
customer operations.
The Company recognises the importance of continuous
improvement to long-term success. The Monadelphous
Innovation Framework provides the strategic direction and
governance structures to direct and focus the Company’s
productivity and innovation activities, prioritises and
coordinates the delivery of these initiatives, and ensures
collaboration across the business.
Focus was placed on system optimisation and automation
activities, as well as data analytics to identify opportunities
to improve operational performance and productivity levels.
Activities continued in the areas of application and integration
of data capture, workflow and visualisation tools, including
the use of products incorporating artificial intelligence
technology. During the year, the Company deployed in-
vehicle monitoring system (IVMS) and tracking technology
to measure and enable improved productivity, safety and
utilisation levels across its fleet of plant and equipment.
People
Monadelphous recognises that the strength of its reputation
and ability to deliver is based on the quality of its people.
The Company is focussed on the attraction, development
and retention of high calibre employees who live its values
and actively contribute to the overall success of the business.
The strategic diversification of the business over recent years,
internationally and into the infrastructure sector, has seen a
significant increase in the number of subcontractors engaged
to supplement the Company’s capability. The Monadelphous
workforce, including subcontractors, totalled 7,091 at the
end of the year, with 5,942 directly employed, a slight
increase on 12 months earlier.
Employee numbers increased on the Company’s offshore oil
and gas maintenance contracts and as overall maintenance
services activity levels grew. This expansion was offset by
the demobilisation of a number of construction projects.
Safety and wellbeing
Monadelphous is committed to the principle of zero
harm and this policy is underpinned by its safety message
The Safe Way is the Only Way.
The Company’s 12-month total recordable injury
frequency rate increased to 4.02 incidents per million
man-hours worked, impacted by the rapid mobilisation
of resources required to support the growth in maintenance
activity, as well as the increasing number of subcontractors
in the business.
To address the disappointing performance trend, the
Company implemented improvement actions, including
improved subcontractor management practices, a revised
safety leadership development program and the launch
of a safety behavioural standard framework to support
a strong and sustainable safety culture. A major
organisational restructure of the Maintenance and Industrial
Services division was also undertaken to better align the
structure to focus the appropriate level of management
resources on its safety performance and initiatives.
During the year approximately 250 employees completed
the Company’s Leading the Safe Way course for
supervisors. In recognition of the critical role supervisors
and superintendents play in achieving health, safety
and environmental success, this certified program
addresses core supervisory skills. As a mandated course
for frontline leaders in the business, participants learn
about communication and risk management skills,
an introduction to behavioural-based safety and the
Company’s occupational health and safety requirements.
To underline its reputation as a leader in the area of
health and safety management, Monadelphous decided
to early adopt the new ISO 45001:2018, the International
Standards Organisation standard for occupational health
and safety management systems and, during the year,
was one of the first to achieve certification in Australia.
Monadelphous Group Limited | Operating and Financial Review | 29
CASE STUDY
Managing Director’s Safety
Innovation Award
The second year of the annual Managing Director’s Safety
Innovation Award underlined the Company’s strong innovation
culture. Pleasingly, there was an emerging trend of collaboration
across teams to develop high potential ideas into effective and
sustainable improvements. These collaborations typically involved
genesis at the shop floor, with technical development support
from engineering design or subject matter experts. Collaboration
spanned both operating divisions, demonstrating the effect of
programs for sharing successes, skills and expertise leveraged
across the whole business.
This year’s winning innovation was The Inspection Bot.
This clever innovation used robotic technology to remove
the requirement for personnel to physically work on conveyor
systems to inspect product retaining skirts, thereby eliminating
exposure to heat stress and manual handling hazards.
This safety innovation also had the added benefit of a substantial
reduction in the cost of skirt inspections for customers.
Apprenticeship and Cadet Programs
Monadelphous is supporting 37 apprentices on
their journey to become fully qualified boilermakers,
mechanical fitters, electricians, heavy duty mechanics
and carpenters. These employees are completing
traineeships in professional, trade and administration
support roles, including surface preparation and coating,
business administration and telecommunications.
Development of our people
Certificate IV and Diploma of Leadership and Management
45 Monadelphous employees, including two Indigenous
employees, completed their Certificate IV or Diploma of
Leadership and Management during the year. These courses
aim to inspire positive change in behaviours relating to
leadership and encourage creativity to develop and implement
innovative solutions that address workplace challenges.
Emerging Leaders Program
Established in 2011, the Emerging Leaders Program,
which centres on behavioural leadership, provides the
foundation for high-performing individuals who are new
to, or on the cusp of, leadership roles, to develop their
leadership capabilities to match the requirements of the
business. During the year, 27 emerging leaders participated
in the program.
Monadelphous employee with the in-house developed skirt inspection robot.
Talent management and development
Monadelphous’ success is dependent on its ability to attract,
develop and retain key talent. Talent management, succession
planning and development activities are critical to ensuring
employee job satisfaction and maintaining the ‘Monadelphous
way’ of delivering services. Pleasingly, key talent retention
levels remained high during the year. The Company will
maintain its focus on attracting and retaining key talent as
market conditions continue to improve, and the employment
market tightens.
During the year, the Company implemented the Senior
Leadership Capability Framework to provide a behavioural
‘road map’ for aspiring and existing leaders. The framework
provides the foundation for all leadership and talent initiatives.
People development remained in the spotlight with
the continued rollout of the Company’s future workforce
programs, including its graduate and apprenticeship
programs, and emerging and established employee
leadership and management courses.
Future workforce attraction
Monadelphous Graduate Development Program
The Company’s nationally recognised Monadelphous
Graduate Development Program supports more than
80 graduates from disciplines including engineering,
construction management, human resources, accounting,
and health, safety, environment and quality. Results from the
independent Australian Association of Graduate Employers
2018 survey show Monadelphous graduates were highly
complimentary about the quality of development, level of
responsibility and positive company culture at Monadelphous.
30 | Monadelphous Group Limited | Annual Report 2019
Leading at Monadelphous Program
Last held in 2016, the Leading at Monadelphous Program
has been redesigned and relaunched, to align with the
Senior Leadership Capability Framework. The program
aims to develop Monadelphous’ senior leaders, further
equipping them with skills and capabilities to support the
Company strategy.
Diversity and inclusion
Gender diversity and inclusion
Across its operations, Monadelphous is committed to
attracting a workforce where people of all backgrounds
work together. The Company provides a working
environment where the unique contribution of its people is
equally valued and recognised, and where each employee
is inspired to contribute their best in their delivery of the
Monadelphous vision. Diversity in the workforce brings
a broader range of perspectives and ideas, creating value
for customers and shareholders.
Monadelphous presented its 2018/19 Workplace Gender
Equality Report, which can be found on the Workplace
Gender Equality Agency and Monadelphous websites.
In late 2018, the Company formally launched its Gender
Diversity and Inclusion Plan 2018-2020, setting out
how it will enhance the rate of female participation
at Monadelphous. The focus of the Plan includes the
Company’s Graduate Development Program intake as one
of the foundations of its future workforce, along with the
advancement of female talent across the business.
The Company provides a
working environment where
the unique contribution of
its people is equally valued
and recognised.
Key initiatives have been identified in the areas of attraction,
education and retention to enable strategic, sustainable
and meaningful change. Examples include promotion of
science, technology, engineering and mathematics (STEM)
as a career path and education to challenge existing
stereotypes that exist within the industries in which the
Company operates. The Plan also details the Company’s
ongoing commitment to targets of no greater than 10 per
cent attrition of key female talent per annum and an intake
of at least 20 per cent female engineers into the Company’s
Graduate Development Program.
Monadelphous employee reviewing an inspection tag at the Woodside-operated Karratha Gas Plant.
Monadelphous Group Limited | Operating and Financial Review | 31
Indigenous engagement
Monadelphous recognises and respects the traditional
owners of the land upon which it operates and considers
traditional culture and heritage an important part of its
business. Despite the significant and ongoing strategic
growth and diversification of the business over the period,
pleasingly the Company continued to realise a positive trend
in Indigenous engagement. Monadelphous maintained its
Aboriginal and Torres Strait Islander target employment rate
in excess of 2.5 per cent during the year.
The Company continued to progress its activities
outlined in its Stretch Reconciliation Action Plan 2017-
2020. Through the Company’s ongoing commitment
to improving outcomes for Aboriginal and Torres Strait
Islander peoples, a dedicated Indigenous procurement
strategy was developed during the year. It outlines the
importance Monadelphous places on actively engaging
suppliers who express a commitment to developing
sustainable relationships with new and existing
Aboriginal and Torres Strait Islander businesses.
Similarly, Monadelphous continues to identify new
partnerships with Aboriginal and Torres Strait Islander-
owned businesses to enter into preferred supplier
agreements and commercial relationships.
The Company’s success in diversity was highlighted
with its inclusion in the Federal Government’s
Employment Parity Initiative, a program launched in
2015 with the aim of increasing the participation level
of Indigenous employees in Australian businesses.
Monadelphous has committed to creating 200 new
Indigenous jobs over four years.
Monadelphous leaders sitting by the campfire in Beverley, Western Australia as
part of a Cultural Immersion Program to better understand Indigenous culture.
CASE STUDY
Cultural Immersion Program
Monadelphous leaders from across the business
participated in a cultural immersion program during April
and May 2019 on culturally significant country outside of
Beverley, Western Australia, guided by traditional owners
of the land. The two-day activity provided leaders with the
opportunity to immerse themselves in Aboriginal culture,
viewing historical sites and spending time as a group
participating in open and honest conversations about
perceptions and challenges. Activities were broken down
into key themes of history, cultural competency, perception
biases and how leaders may apply these learnings to both
the workplace and in their personal lives.
Wind turbine blade ready for erection at Lal Lal Wind Farm in Victoria.
32 | Monadelphous Group Limited | Annual Report 2019
Investment in people systems
The Company’s e-Learning capability was enhanced
during the year with the introduction of a scalable solution
capable of tracking and reporting on all e-Learning activity.
On average, 800 users in the business engage with the
updated platform each month. This solution has been
strategic in the Company’s ability to support the growth
and diversification of the business and underlines its
commitment to compliance and the ongoing development
of Monadelphous employees.
Attracting talent through innovative means remains a
priority and has seen Monadelphous invest in technologies
which assist the Company to attract a workforce reflective
of its organisational values.
Identification of a replacement for the Company’s existing
recruitment system was also a focal point during the
year. Project Mila, the Ngoongar term for ‘future time’,
delivered a business case to support the implementation
of a scalable recruitment and talent management solution
to reduce recruitment cost, time to fill roles and improve
the customer experience for all stakeholders. With the
aim of enhancing Monadelphous’ labour responsiveness,
the solution will provide improved ability to source, select
and appoint appropriate candidates and reduce delivery
timeframes through targeted search, effective reporting
and system automation. The solution will provide a better
line-of-sight to internal talent, enabling improved people
deployment and development.
Community
Monadelphous has a strong sense of responsibility to
the local communities in which it operates. Key areas of
support during the year included education, employment,
community and diversity.
The Company continues to enhance its systems and
processes to ensure effective stakeholder engagement
and community support, as the Company diversifies into
markets with greater exposure to urban areas, and the
general public.
Monadelphous entered the second year of its strategic
partnership with the University of Western Australia’s (UWA)
Girls in Engineering program. The aim of the program
is to provide opportunities for girls to learn more about
engineering while still at high school, ahead of selecting
tertiary study. Monadelphous employees volunteer their time
to facilitate STEM immersive activities at local high schools
across Western Australia in conjunction with UWA and
other industry personnel. During the year, Monadelphous
facilitated 12 in-school and on-campus activities.
The Company contributed more than $200,000 to local
community groups, organisations and charities during the
year. Activities included the support of local football clubs
in the Pilbara and south-west of Western Australia, the
UWA Women’s Football Team, Variety Western Australia
and Tiny Sparks Western Australia, as well as investment
of $10,000 into the Port Hedland community to support
the Halloween Neon Fun Run. The free family event
was the first of its kind in Port Hedland and brought
together nearly 1,000 community members for a four
kilometre Halloween-inspired glow-in-the-dark fun run.
20 Monadelphous employees and their family members
volunteered their time to assist with the event.
Monadelphous Group Limited | Operating and Financial Review | 33
Carbon Footprint
Monadelphous recognises the need to conduct operations
in an environmentally responsible manner. The Company’s
overall carbon footprint is deemed small but it continues
to look for ways to reduce its emissions.
Carbon emissions data is monitored for environmental
planning, legislative requirements and sustainability
reporting purposes. This involves the collection of data
relating to fuel use, energy consumption and indirect
emissions. The Company has voluntarily engaged in
greenhouse gas monitoring and reporting, highlighting
efforts to minimise its carbon footprint.
Energy usage is predominantly in the areas of gases for
welding processes and fuel used in vehicles, and plant
and equipment required for execution of services.
Monadelphous undertakes greenhouse and energy reporting
under the National Greenhouse and Energy Reporting
Act. During the year, reportable scope 1 and 2 carbon
emissions (CO2e) were equivalent to 19,613 tonnes,
significantly below the legislative reporting threshold of
50,000 tonnes CO2e. Total emissions were 32,530 tonnes
CO2e. The Company routinely collects and monitors carbon
reporting data and has assessed that its current reporting
is appropriate for all stakeholders in consideration of the
risks, impacts and costs of reporting, and is consistent with
the principles of the ESG Reporting Guide for Australian
Companies (2015).
Environment
Monadelphous recognises the importance of the natural
environment in the regions where it operates and the
need to manage its activities for long-term environmental
sustainability. The Company’s objective is to minimise
the impact from its operations through the identification
and mitigation of risks to the natural environment.
This is achieved through leadership, resources, processes,
education and a demonstrable commitment to the
Company’s environmental policy.
The Company conducts work in environmentally sensitive
areas and has a responsibility to protect local ecosystems
when delivering projects. Ensuring compliance with
customer requirements and environmental legislation
and regulation is critical to maintaining a reputation as
a contractor of choice. The Company’s history of no serious
environmental incidents continued this year, in line with
its target of zero harm.
Moves towards a low-carbon economy will bring change in
a number of industries within which Monadelphous operates.
The Company is committed to ongoing monitoring of its
environmental risk profile and developing innovative climate
change solutions in an effort to reduce emissions and energy
consumption within its operations and those of its customers.
With the increasing impact of climate change and growing
importance of alternative sources of energy, Monadelphous’
expanding footprint in the renewable energy sector is an
important step in its path towards broader environmental,
economic and social sustainability. Since establishment,
Zenviron has been involved in the construction of eight
wind farms, comprising a total of 387 wind turbines with
generation capacity of 1,392 MW. This represents power for
777,000 homes and the displacement of 4.5 million tonnes of
carbon dioxide each year. To date, 150 turbines are complete
and in operation, with 237 turbines under construction.
CASE STUDY
Arid Recovery
Monadelphous is a proud supporter of Arid
Recovery, an independent not-for-profit
organisation focussed on pioneering wildlife
conservation across 123 square kilometres
of wildlife reserve in Roxby Downs, South
Australia. With a commitment spanning over
20 years, Monadelphous continues to support
Arid Recovery’s infrastructure requirements,
supplying materials, fabrication, transport and
commissioning of supporting facilities.
Throughout the years, Monadelphous has
worked in collaboration with Arid Recovery in
the design and fabrication of viewing platforms,
cat capture cages, signage, entrance gates and
basic infrastructure.
Monadelphous employees visiting our long-term community
partner Arid Recovery in regional South Australia.
34 | Monadelphous Group Limited | Annual Report 2019
Employees reviewing the Monadelphous Stretch Reconciliation Action Plan 2017-2020.
Governance
The Board of Directors of Monadelphous Group Limited
is responsible for establishing the Company’s corporate
governance framework with regard to the ASX Corporate
Governance Council Principles and Recommendations.
The Board guides and monitors the business and affairs
of Monadelphous on behalf of its shareholders, by whom
they are elected and to whom they are accountable.
The Company has in place charters, policies and
procedures which support the framework to ensure
a high standard of governance is maintained.
Monadelphous’ full Corporate Governance Statement, Board
and Sub-Committee charters and the Company’s governance
policies, are published on the Company’s website.
Monadelphous has exposure to a number of material
economic, environmental and social sustainability risks
which are identified and managed within the Group’s Risk
Management Framework. These risks and, the Company’s
approach to their management, are disclosed in the
Company’s Corporate Governance Statement.
Monadelphous has been certified to ISO 9001 quality
management systems, AS/NZS 4801 for occupational
health and safety management systems and, for the first
time during the year, the new ISO 45001:2018 (replacing
OHSAS 18001), with the Company being one of the first
to achieve certification in Australia.
Mitigation of environmental risks includes the maintenance
and implementation of a certified environmental
management system (AS/NZS ISO 14001) to ensure
sustainable work practices and monitoring and minimising
environmental impacts as far as practicable.
Code of Conduct
The Monadelphous values form the foundation of a way of life
that stands the Company apart from all others. They represent
what the Company stands for and provide a basis for
appropriate standards of behaviour. The Company’s Code of
Conduct is underpinned by the Company values and provides
guidance on the expected behaviour of all employees, so that
decisions and actions reflect the highest standards of conduct.
During the year, the Code of Conduct was reviewed and
enhanced, which included formalising Monadelphous’
Anti-Bribery and Corruption Policy to reiterate the
Company’s zero tolerance philosophy to any form of bribery
and corruption in the conduct of its activities. This was
complemented by anti-bribery and corruption training rolled
out across the business.
In addition, Monadelphous added a new Supplier Code
of Conduct to its behavioural framework which outlines
minimum expectations of the conduct of its suppliers in
the areas of health and safety, environment, human rights,
business integrity and ethics, emphasising its zero tolerance
approach to bribery and corruption in supplier conduct.
Monadelphous operates in diverse markets and is committed
to ensuring that all employees in its supply chain are
treated fairly, ethically and with respect. The commitment to
human rights is articulated through guiding principles which
suppliers are expected to adhere to, including compliance
with laws on employment practices, zero use of forced or
compulsory labour, and equal opportunity in employment.
The Company has an integrity hotline service, facilitated
by an independent service provider, where employees,
contractors and members of the public can report instances
of actual or suspected unethical or unlawful conduct
associated with Monadelphous operations. During the year
this service was enhanced, introducing the ability to raise
concerns or queries via a secure online website.
Monadelphous Group Limited | Operating and Financial Review | 35
FINANCIAL
REPORT
Contents
Directors’ Report
Director’s Declaration
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to the Consolidated Financial Statements
37
59
60
61
62
63
64
65
36 | Monadelphous Group Limited | Annual Report 2019
Employees completing safety inspections at BHP’s Mining Area C in the Pilbara region of Western Australia.
DIRECTORS’ REPORT
Your directors submit their report for the year ended 30 June 2019.
DIRECTORS
The names and details of the directors of the Company in office during the financial year and until the date of this report are as follows.
Directors were in office for this entire period unless otherwise stated.
Names, qualifications, experience and special responsibilities
Calogero Giovanni Battista Rubino
Chairman
Appointed 18 January 1991
Resigned as Managing Director on 30 May 2003 and continued as Chairman
53 years experience in the construction and engineering services industry
Robert Velletri
Managing Director
Peter John Dempsey
Lead Independent Non-Executive Director
Appointed 26 August 1992
Mechanical Engineer, Corporate Member of Engineers Australia
Appointed as Managing Director on 30 May 2003
40 years experience in the construction and engineering services industry
Appointed 30 May 2003
Civil Engineer, Fellow of Engineers Australia, Member of the Australian Institute of
Company Directors
47 years experience in the construction and engineering services industry
Also a non-executive director of the following other publicly listed entity, Service Stream
Limited (ASX: SSM) – appointed 1 November 2010
Christopher Percival Michelmore
Independent Non-Executive Director
Appointed 1 October 2007
Civil Engineer, Fellow of Engineers Australia
Dietmar Robert Voss
Independent Non-Executive Director
Helen Jane Gillies
Independent Non-Executive Director
47 years experience in the construction and engineering services industry
Appointed 10 March 2014
Chemical Engineer, Member of the Australian Institute of Company Directors
45 years experience in the oil and gas, and mining and minerals industries
Appointed 5 September 2016
Solicitor, Master of Business Administration and Construction Law, Fellow of the
Australian Institute of Company Directors
23 years experience in the construction and engineering services industry
Also a non-executive director of the following other publicly listed entity, Yancoal
Australia Limited (ASX: YAL) – appointed 30 January 2018
Susan Lee Murphy AO
Independent Non-Executive Director
Appointed 11 June 2019
Civil Engineer, Honorary Fellow of Engineers Australia
40 years experience in the resources and infrastructure industries
COMPANY SECRETARIES
Philip Trueman
Company Secretary and Chief Financial Officer
Kristy Glasgow
Company Secretary
Appointed 21 December 2007
Chartered Accountant, Member of Chartered Accountants Australia and New Zealand
19 years experience in the construction and engineering services industry
Appointed 8 December 2014
Chartered Accountant, Member of Chartered Accountants Australia and New Zealand
14 years experience in the construction and engineering services industry
Monadelphous Group Limited | Financial Report | 37
DIRECTORS’ REPORT
INTERESTS IN THE SHARES AND OPTIONS OF THE COMPANY AND RELATED BODIES CORPORATE
As at the date of this report, the interests of the directors in the shares and options of Monadelphous Group Limited were:
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
S. L. Murphy
EARNINGS PER SHARE
Basic Earnings Per Share
Diluted Earnings Per Share
DIVIDENDS
Final dividends declared
– on ordinary shares
Dividends paid during the year:
Current year interim
– on ordinary shares
Final for 2018
– on ordinary shares
CORPORATE INFORMATION
Corporate structure
Ordinary
Shares
1,022,653
2,106,670
Performance
Rights over
Ordinary Shares
Nil
13,341
Nil
Nil
Nil
Nil
Nil
78,000
40,000
2,852
8,278
Nil
Cents
53.72
53.62
Cents
$’000
23.00
21,688
25.00
23,561
32.00
30,112
Monadelphous Group Limited is a company limited by shares that is incorporated and domiciled in Australia. Monadelphous Group Limited has
prepared a consolidated financial report incorporating the entities that it controlled during the financial year (refer note 20 in the financial report).
The registered office of Monadelphous Group Limited is located at:
59 Albany Highway
Victoria Park
Western Australia 6100
38 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
CORPORATE INFORMATION (continued)
Nature of operations and principal activities
Engineering Services
Monadelphous is a diversified services company operating in the resources, energy and infrastructure industry sector.
Services provided include:
• Fabrication, modularisation, offsite pre-assembly, procurement and installation of structural steel, tankage, mechanical and process
equipment, piping, demolition and remediation works
• Multi-disciplined construction services
• Plant commissioning
• Electrical and instrumentation services
• Process and non-process maintenance services
• Front-end scoping, shutdown planning, management and execution
• Water and waste water asset construction and maintenance
• Irrigation services
• Construction of transmission pipelines and facilities
• Operation and maintenance of power and water assets
• Heavy lift and specialist transport
• Access solutions
• Dewatering services
• Corrosion management services
General
Monadelphous operates from major offices in Perth and Brisbane, with regional offices in Sydney, Newcastle, Houston (USA), Beijing (China),
Christchurch (New Zealand), Ulaanbaatar (Mongolia) and Manila (Philippines), and a network of workshop facilities in Kalgoorlie, Karratha,
Port Hedland, Newman, Tom Price, Darwin, Roxby Downs, Gladstone, Hunter Valley, Mackay, Bibra Lake, Bunbury, Chinchilla and Mudgee.
The consolidated entity’s revenue is earned predominantly from the resources, energy and infrastructure industry sector.
There have been no significant changes in the nature of those activities during the year.
Employees
The consolidated entity employed 5,942 employees as of 30 June 2019 (2018: 5,828 employees).
OPERATING AND FINANCIAL REVIEW
Review
A review of operations of the consolidated entity during the financial year, the results of those operations, the changes in the state of affairs
and the likely developments in the operations of the consolidated entity are set out in the Operating and Financial Review section.
Operating results for the year
Revenue from contracts with customers
Profit after income tax expense attributable to equity holders of the parent
2019
$’000
2018
$’000
1,477,269
1,734,881
50,565
71,479
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
There have been no significant changes in the state of affairs of the parent entity or the consolidated entity during the financial year.
Monadelphous Group Limited | Financial Report | 39
DIRECTORS’ REPORT
SIGNIFICANT EVENTS AFTER REPORTING PERIOD
Dividends declared
On 19 August 2019, the directors of Monadelphous Group Limited declared a final dividend on ordinary shares in respect of the 2019 financial year.
The total amount of the dividend is $21,687,732 which represents a fully franked final dividend of 23 cents per share. This dividend has not been
provided for in the 30 June 2019 financial statements. The Monadelphous Group Limited Dividend Reinvestment Plan will apply to the dividend.
Acquisition of iPipe Services assets
On 5 July 2019, Monadelphous Group Limited completed the purchase of assets of iPipe Services, a provider of technology solutions,
construction and maintenance services to the coal seam gas sector. Total consideration of the acquisition was approximately $3,000,000.
The acquisition was not material to the group.
Other than the items noted above, no matters or circumstances have arisen since the end of the financial year which significantly affected
or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of the consolidated
entity in subsequent financial years.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
Refer to the Operating and Financial Review section for information regarding the likely developments and future results.
ENVIRONMENTAL REGULATION AND PERFORMANCE
Monadelphous Group Limited is subject to a range of environmental regulations. During the financial year, Monadelphous Group Limited
met all reporting requirements under any relevant legislation. There were no incidents which required reporting. The Company strives to
continually improve its environmental performance.
SHARE OPTIONS
Unissued shares
As at the date of this report, there were 165,636 Performance Rights on issue as follows:
• 82,804 Performance Rights to take up one ordinary share in Monadelphous Group Limited. The Performance Rights have a vesting
date 1 July 2020
• 82,832 Performance Rights to take up one ordinary share in Monadelphous Group Limited. The Performance Rights have a vesting
date 1 July 2021
The Board determined, based on the financial performance of the Company for the year ended 30 June 2019, that an award could
be made under the Combined Reward Plan. The total value of the award approved by the Board was approximately $4,000,000 with
around 100 employees eligible for an award. It is estimated that the number of Performance Rights to be issued will be approximately
220,000, determined using the share price at 30 June 2019. Refer to the Remuneration Report for further details.
Performance Rights holders do not have any right, by virtue of the performance right, to participate in any share issue of the Company
or any related body corporate or in the interest of any other registered Scheme.
Shares issued as a result of the exercise of options
During the financial year, no employees or directors have exercised any options.
On 1 July 2019, 82,771 Performance Rights vested and were exercised.
INDEMNIFICATION AND INSURANCE OF DIRECTORS AND OFFICERS
During the financial year, the Company has paid premiums in respect of a contract insuring all the directors and officers of Monadelphous
Group Limited against a liability incurred in their role as directors of the Company, except where:
(a) the liability arises out of conduct involving a wilful breach of duty; or
(b) there has been a contravention of Sections 182 or 183 of the Corporations Act 2001.
The total amount of insurance contract premiums paid during the financial year was $529,983 (2018: $432,614).
INDEMNIFICATION OF AUDITORS
The Company has agreed to indemnify its auditors, Ernst & Young, as part of the terms of its audit engagement agreement against certain
liabilities to third parties arising from the audit to the extent permitted by law. The indemnity does not extend to any liability resulting from a
negligent, wrongful or wilful act or omission by Ernst & Young. No payment has been made to indemnify Ernst & Young during or since the audit.
INTERESTS IN CONTRACTS OR PROPOSED CONTRACTS WITH THE COMPANY
During or since the end of the financial year, no director has had any interest in a contract or proposed contract with the Company being
an interest the nature of which has been declared by the director in accordance with Section 300(11)(d) of the Corporations Act 2001.
40 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED)
The Remuneration Report for the year ended 30 June 2019 outlines the Key Management Personnel remuneration arrangements of the
Group in accordance with the requirements of the Corporations Act 2001.
For the purposes of this report Key Management Personnel of the Group are defined as those persons having the authority and
responsibility for planning, directing and controlling the major activities of the Company and the Group, directly or indirectly, including
any director (whether executive or otherwise) of the parent Company. For the purposes of this report, the term ‘executive’ encompasses
the Managing Director (MD), Chief Financial Officer (CFO) and Executive General Managers (EGM) of the Group.
Details of Key Management Personnel
(i) Directors
C. G. B. Rubino
R. Velletri
P. J. Dempsey
Chairman
Managing Director
Deputy Chair and Lead Independent Non-Executive Director
C. P. Michelmore
Independent Non-Executive Director
D. R. Voss
H. J. Gillies
S. L. Murphy
(ii) Senior executives
D. Foti
Z. Bebic
P. Trueman
Independent Non-Executive Director
Independent Non-Executive Director
Independent Non-Executive Director
Executive General Manager, Engineering Construction
Executive General Manager, Maintenance & Industrial Services
Chief Financial Officer and Company Secretary
Remuneration Philosophy
The performance of the Company depends predominantly and primarily upon the quality of its employees. To prosper, the Company must
attract, motivate and retain highly skilled employees, which includes the directors and executives of the Company.
To this end, the Company embodies the principles of providing competitive rewards to attract and retain high calibre executives, and the
linking of executive rewards to the creation of shareholder value.
Remuneration Committee
The Remuneration Committee of the Board of Directors of the Company is responsible for determining and reviewing compensation
arrangements for the directors and the executive management team.
The Remuneration Committee utilises remuneration survey data compiled by a recognised remuneration research organisation across a range
of industries and geographic regions. The remuneration survey data is updated every 6 months and is used to assess the appropriateness of
the nature and amount of remuneration of directors and the executive management team. This assessment is made with reference to relevant
employment market conditions, with the overall objective of ensuring maximum stakeholder benefit from the retention of a high quality Board
and executive team.
In determining the remuneration levels of directors and executives, the Remuneration Committee takes into consideration the performance
of the Group, divisions and business units as well as that of the individual.
Remuneration Structure
In accordance with best practice corporate governance, the structure of non-executive director and executive remuneration is separate and distinct.
Monadelphous Group Limited | Financial Report | 41
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Executive remuneration
Objective
The Company aims to reward executives with a level and mix of remuneration commensurate with their position and responsibilities within
the Company so as to:
• Reward executives for Group, divisional, business unit, and individual performance;
• Align the interests of executives with those of shareholders; and
• Ensure total remuneration is competitive by market standards.
All executives have non-fixed term employment contracts. The Company or executive may terminate the employment contract by providing
3 months written notice. The Company may terminate the contract at any time without notice if serious misconduct has occurred.
Structure
In determining the level and make-up of executive remuneration, the Remuneration Committee receives external survey data from a recognised
remuneration research organisation and considers market levels for comparable executive roles when making its recommendations to the Board.
Executive remuneration consists of a fixed remuneration element and a variable remuneration element. The variable remuneration element
can be provided under the Combined Reward Plan and/or the Employee Option Plan.
Remuneration Element
Individual Components
Purpose
Link to Performance
Fixed remuneration
Comprises base salary,
superannuation and
other benefits.
Variable remuneration
- Combined Reward Plan
Comprises cash payment,
and/or Performance
Rights issued under the
Monadelphous Group Limited
Performance Rights Plan.
To provide market competitive
fixed remuneration appropriate
to the position and competitive
in the market, taking into
account the individual’s skills,
experience and qualifications.
Assessed at an individual
level based on performance
of responsibilities and
cultural alignment with
the Company’s values.
To recognise and reward
the senior leaders of the
business who contribute to
the Group’s success, to align
these rewards to the creation
of shareholder wealth over
time and ensure the long term
retention of employees.
Performance assessed against
financial, safety, people,
customer satisfaction and
strategic progress targets set by
the Board on an annual basis.
Vesting of awards is dependent
on continuity of employment.
Variable remuneration
- Employee Option Plan
Comprises options issued
under the Monadelphous Group
Limited Employee Option Plan.
To retain and reward key
employees in a manner
aligned to the creation
of shareholder wealth.
Vesting of awards is dependent
on exceeding EPS growth targets
and continuity of employment.
The proportion of fixed remuneration and variable remuneration is established for each member of the executive management team
by the Remuneration Committee. Tables 1 and 2 on page 47 and page 48 of this report detail the proportion of fixed and variable
remuneration for each of the executive directors and the senior executives of the Company.
42 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Fixed remuneration
Objective
Monadelphous has a structured approach aimed at delivering fixed remuneration which is market competitive and rewards performance.
The Company participates in a number of respected remuneration surveys from which it receives quarterly or six-monthly market and
forecast data, and its remuneration system is designed to analyse detailed market and sector information at various levels.
The level of fixed remuneration is set to provide a base level of remuneration which is both appropriate to the position and competitive
in the market, taking into account the individual’s skills, experience and qualifications.
Fixed remuneration levels are considered annually by the Remuneration Committee having reviewed an individual’s performance, alignment
with the Company’s values and comparative remuneration levels in the market.
Structure
Executive team members are given the opportunity to receive their fixed remuneration in a variety of forms including base salary,
superannuation and other benefits. It is intended that the manner of payment chosen will be optimal for the recipient without creating
undue cost for the Company.
The fixed remuneration component of the executives of the Company is detailed in Tables 1 and 2 on page 47 and page 48 of this report.
Variable remuneration – Combined Reward Plan
Objective
The objective of the Combined Reward Plan (the CR Plan) is to recognise and reward the senior leaders of the business who positively
contribute to the Company’s success, to align these rewards to the creation of shareholder wealth over time and to ensure the long term
retention of the Company’s key talent.
The CR Plan combines short and long term incentive elements and rewards performance of both the Company and the employee. The equity
component of the award is subject to service vesting conditions and disposal restrictions, encouraging employee retention and linking rewards
to the creation of shareholder value through long term share ownership, with employee and shareholder alike benefitting from the long term
growth in the share price.
Structure
Under the CR Plan, the Board has the discretion to make awards on an annual basis subject to Company and individual performance.
Awards may be delivered in the form of a combination of cash and/or Performance Rights.
For the year ended 30 June 2019, the Board and Remuneration Committee determined that 100 per cent of the awards under the Combined
Reward Plan will be issued in the form of Performance Rights. The number of Performance Rights to be issued will be calculated using the
arithmetic average of the ten-day daily volume weighted average market price of the Company’s shares commencing on the second trading
day after the record date in respect of the FY19 Final Dividend. This calculation is the same as that used to determine the undiscounted
share price for the dividend reinvestment plan.
For the year ended 30 June 2018, 25 per cent of the award was paid in cash shortly after the year end, with 75 per cent of the award issued
in the form of Performance Rights granted in July and August 2018 (except for those issued to the Managing Director which were granted at
the AGM in November 2018). The number of Performance Rights issued were calculated using the arithmetic average of the ten-day daily
volume weighted average market price of the Company’s shares commencing on the second trading day after the record date in respect of the
FY18 Final Dividend; in other words, the dividend reinvestment plan price of $15.73.
The Performance Rights component (for both the 2018 and 2019 awards) vest into shares in equal instalments, one, two and three years
subsequent to the year of allocation, subject to the employee remaining in the employ of the Company at those particular dates. The
Performance Rights are exercisable into shares at those dates, with one share issued for each vested Performance Right. The total number
of shares issued are held in escrow until a date three years after the Performance Rights were originally issued.
Unvested Performance Rights remain subject to Monadelphous’ clawback policy. The Board has the discretion as to the circumstances
that would result in a clawback of unvested Performance Rights. Factors resulting in material financial misstatement or underperformance,
gross negligence, material lack of compliance, significant personal underperformance or behaviour that is likely to damage the Company’s
reputation, would likely result in a clawback of unvested Performance Rights.
Performance Requirements
At the beginning of each financial year, the Board sets quantified, challenging, performance targets for the key performance areas of the
business, taking into account the prevailing economic conditions for the year ahead, the Company’s strategic objectives and the key risk
factors facing the business at that time. The targets are designed to focus the activities of the business on the key areas of performance
that deliver long term sustainable growth for shareholders.
Monadelphous Group Limited | Financial Report | 43
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Variable remuneration – Combined Reward Plan (continued)
Performance Requirements (continued)
For the year ended 30 June 2019, the Managing Director had a target opportunity of 40% of fixed remuneration, and a maximum opportunity
of 60%. Executives had a target opportunity of 30% of fixed remuneration, and a maximum opportunity of 45%. The target opportunity is
awarded for achieving the objectives set by the Board at the beginning of each financial year. In order for the maximum opportunity to be
awarded, performance must be a clear margin above the planned targets that were set.
At the end of each financial year, the Board assesses the Group’s net profit before tax performance against the budgeted target prior to any
awards being considered under the CR Plan.
Once the Board has approved that an award can be made under the CR Plan, executive performance is assessed against the relevant targets
set at the beginning of the financial year at a Group, division, business unit and individual level. This assessment is taken into account when
determining the amount, if any, of the award to be made to each individual under the CR Plan, with annual awards being subject to approval
by the Remuneration Committee and Board. The following key performance areas (KPAs) are considered in the assessment process, covering
a number of financial and non-financial, Group and divisional measures of performance. The table below provides an overview of these KPAs
and the weighting applied when assessing performance.
Earnings Performance
Other
Earnings per Share
Divisional
Contribution
Group KPAs
Divisional KPAs
60%
60%
30%
-
-
30%
40%
-
-
-
40%
40%
MD
CFO
EGM
Other Group or divisional KPAs relate to:
• Working capital management
• Safety performance
• People performance
• Customer satisfaction
• Strategic progress
Subsequent to year end, the Board determined on 30 July 2019, based on the financial performance of the Company for the year
ended 30 June 2019, that an award could be made under the CR Plan, with approximately 100 employees eligible for an award
of Performance Rights.
The Company regards the performance targets and the actual result as confidential and commercially sensitive in nature and if disclosed, would
provide an unfair advantage to competitors. Therefore, the Company has only disclosed the performance measure and the actual performance
relative to the target (i.e. between target and maximum, on target or between threshold and target) as opposed to the actual target itself.
Group and Divisional performance for the year ended 30 June 2019 was as follows:
Earnings Performance
Other
EPS
n
Divisional
Contribution
Working
Capital
Management
Safety
People
Customer
Satisfaction
Strategic
Progress
n
l
n
n
n
n
s
n
l
l
l
l
l
l
l
l
l
Group
Engineering Construction
Maintenance & Industrial Services
Legend
s Between target and maximum
l On target
n Between threshold and target
44 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Variable remuneration – Combined Reward Plan (continued)
Performance Requirements (continued)
The following table sets out the awards under the CR Plan for each executive for the financial years ended 30 June 2018 and 30 June 2019:
Executive
R. Velletri
P. Trueman
D. Foti
Z. Bebic
2019
Total Award
$
296,800
118,400
154,800
156,800
2018
Total Award
$
419,700
183,200
215,700
238,700
2019
% of Maximum
Opportunity Earned
2018
% of Maximum
Opportunity Earned
49
51
43
52
68
77
70
74
Tables 1 and 2 on page 47 and page 48 of this report detail the proportion of fixed and variable remuneration for each of the executive
directors and the senior executives of the Company for the financial years ended 30 June 2019 and 30 June 2018. The deferred Performance
Right component of the award to be allocated early in the 2020 financial year will be amortised over four years, including the financial year
ended 30 June 2019 and the following one to three year service periods. It is estimated, based on the share price at 30 June 2019, that
approximately 40,000 Performance Rights will be granted to Key Management Personnel under the terms of the CR Plan for the year ended
30 June 2019 (2018: 52,126 Performance Rights).
On 1 November 2018, 237,368 Performance Rights were issued under the terms of the CR Plan for the year ended 30 June 2018 and subject
to the Monadelphous Group Limited Performance Rights Plan Rules. 32,115 Performance Rights were issued to Key Management Personnel.
On 20 November 2018, following approval by shareholders at the Company’s AGM, 20,011 Performance Rights were issued to the
Managing Director, Rob Velletri, under the terms of the CR Plan for the year ended 30 June 2018 and subject to the Monadelphous Group
Limited Performance Rights Plan Rules.
On 1 July 2019, 82,771 Performance Rights representing the first tranche of the award under the terms of the CR Plan for the year ended
30 June 2018 vested and were exercised into Monadelphous Group Limited ordinary shares.
Variable remuneration – Employee Option Plan
Objective
The objective of the Employee Option Plan is to retain and reward key employees in a manner which aligns this element of remuneration with the
creation of shareholder wealth. As previously mentioned, the Company has utilised the CR Plan to reward executives and other employees for the
year ended 30 June 2019, but retains the Employee Option Plan as an alternative or additional scheme for the executive management team.
Structure
Monadelphous Group Limited Employee Option Plan
Equity-based grants to executives are at the discretion of the Remuneration Committee and Board, and may be delivered in the form of options.
Should any issue of options be considered, the individual performance rating of each executive and the annual cost to the Company, on an
individual basis, is taken into account when determining the amount, if any, of options granted.
In accordance with the rules of the Monadelphous Group Limited Employee Option Plan, options may only be exercised in specified window
periods (or at the discretion of the Board in particular circumstances):
25% 2 years after the options were issued
25% 3 years after the options were issued
50% 4 years after the options were issued
In addition, the ability to exercise options during each applicable window period is subject to the financial performance of the Company
during the option vesting period. The options shall only be capable of exercise during that window period where the prescribed performance
hurdle has been achieved. If, however, this hurdle is not achieved for a particular window period, rather than lapsing, the options will be
re-tested during all later window periods in respect of that issue and may become exercisable at that later date.
There are currently no options on issue under the Monadelphous Group Limited Employee Option Plan.
Hedging of equity awards
The Company prohibits executives from entering into arrangements to protect the value of unvested equity-based awards. The prohibition
includes entering into contracts to hedge their exposure to options awarded as part of their remuneration package.
Monadelphous Group Limited | Financial Report | 45
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Non-executive director remuneration
Objective
The Board seeks to set aggregate remuneration at a level which provides the Company with the ability to attract and retain directors
of the highest calibre, whilst incurring a cost which is acceptable to shareholders.
Structure
The Constitution and the ASX Listing Rules specify that the aggregate remuneration of non-executive directors shall be determined from
time to time by a general meeting. The most recent determination was at the Annual General Meeting held on 22 November 2016 when
shareholders approved an aggregate remuneration of $750,000 in the ‘not to exceed sum’ paid to non-executive directors.
The amount of aggregate remuneration sought to be approved by shareholders and the manner in which it is apportioned amongst directors
is reviewed annually. The Board considers the fees paid to non-executive directors of comparable companies when undertaking the annual
review process.
Non-executive director fees consist of base fees and committee chair fees. The Deputy Chair/Lead Independent Non-executive Director also
receives an additional fee. The payment of committee chair fees recognises the additional time commitment required by non-executive
directors to chair the Board committees. Committee members do not receive a separate fee for sitting on a committee.
The table below summarises Board and Committee fees payable to non-executive directors for the financial year ended 30 June 2019
(inclusive of superannuation):
Board Fees
Non-executive Director fee
Board Deputy Chair and Lead Independent Non-executive Director additional fee
Committee Chair Fees
Audit
Remuneration
Nomination
*The Nomination Committee is chaired by the Executive Chairman.
$
114,400
20,000
10,000
10,000
*
Non-executive directors have long been encouraged by the Board to hold shares in the Company (purchased by the director on-market).
It is considered good governance for directors to have a stake in the Company.
Fees for non-executive directors are not linked to the performance of the Company. The non-executive directors do not receive retirement
benefits, nor do they participate in any incentive programs.
The remuneration of non-executive directors for the year ending 30 June 2019 is detailed in Table 1 on page 47 of this report.
Employment contracts
All executives have non-fixed term employment contracts. The Company or executive may terminate the employment contract by providing
3 months written notice. The Company may terminate the contract at any time without notice if serious misconduct has occurred.
Company performance
The profit after income tax expense and basic earnings per share for the Group for the last five years is as follows:
2019
$’000
2018
$’000
2017
$’000
2016
$’000
2015
$’000
Profit after income tax expense attributable to equity
holders of the parent
Basic earnings per share
Share price as at 30 June
50,565
53.72c
$18.81
71,479
76.11c
$15.06
57,563
61.41c
$13.99
67,014
71.77c
$7.46
105,825
113.91c
$9.37
The comparative information has not been restated following the adoption of AASB 15 and continues to be reported under the previous accounting policy. Refer to note 31 for further details.
A review of the Company’s performance and returns to shareholders over the last five years has been provided on page 16 of this report.
46 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Remuneration of Key Management Personnel
Table 1: Remuneration for the year ended 30 June 2019
Short Term Benefits
Post
Employment
Long Term
Benefits
Share-Based
Payments*
Salary
& Fees
$
Leave#
$
Non-
Monetary+
$
Cash
Award
$
Superannuation
$
Performance
Rights
$
Leave
$
Total
Performance
Related
%
Total
$
Total
Performance
Rights
Related
%
Non-Executive Directors
P. J. Dempsey
131,861
C. P. Michelmore
113,596
D. R. Voss
H. J. Gillies
104,464
104,464
S. L. Murphy^
4,968
Subtotal
Non-Executive
Directors
Executive Directors
459,353
-
-
-
-
-
-
21,199
21,199
21,199
21,199
1,045
85,841
C. G. B. Rubino
412,000
37,261
21,199
R. Velletri
973,000 (127,989)
32,387
Subtotal
Executive
Directors
1,385,000
(90,728)
53,586
Other Key Management Personnel
D. Foti
Z. Bebic
758,800
41,217
24,004
643,400
52,685
31,309
P. Trueman
483,500
(5,003)
29,813
Subtotal
Other Key
Management
Personnel
1,885,700
88,899
85,126
Total
3,730,053
(1,829) 224,553
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,527
10,792
9,925
9,925
472
43,641
-
-
-
-
-
-
20,531
8,073
-
-
-
-
-
-
-
165,587
145,587
135,588
135,588
6,485
588,835
499,064
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20,531
31,658
265,788 1,195,375
22.23
22.23
41,062
39,731
265,788 1,694,439
15.69
15.69
20,531
(13,477) 155,654
986,729
20,531
30,920
155,876
934,721
20,531
13,907
118,927
661,675
15.77
16.68
17.97
15.77
16.68
17.97
61,593
31,350
430,457 2,583,125
146,296
71,081
696,245 4,866,399
16.66
14.31
16.66
14.31
^ S. L. Murphy was appointed as an Independent Non-Executive Director on 11 June 2019.
* Relates to both the 2018 and 2019 awards under the CR Plan. The Performance Rights award for the year ended 30 June 2019, to be allocated early in the 2020 financial year, is
being amortised based on an estimated fair value over 4 years commencing 1 July 2018. Refer page 44 for details.
# Leave reflects annual leave accrual less annual leave taken.
+ Non-monetary benefits consist of Directors and Officers, and Life and Salary Continuance, insurance premiums.
Monadelphous Group Limited | Financial Report | 47
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Remuneration of Key Management Personnel (continued)
Table 2: Remuneration for the year ended 30 June 2018
Short Term Benefits
Post
Employment
Long Term
Benefits
Share-Based
Payments
Salary
& Fees
$
Leave#
$
Non-
Monetary+
$
Cash
Award
$
Superannuation
$
Leave
$
Options
$
Total
Performance
Related
%
Total
$
Total
Options
Related
%
Non-Executive Directors
P. J. Dempsey
127,854
C. P. Michelmore 109,589
D. R. Voss
H. J. Gillies
100,457
100,457
Subtotal
Non-Executive
Directors
438,357
Executive Directors
-
-
-
-
-
7,753
6,645
6,092
6,092
26,582
C. G. B. Rubino
412,000
21,802
26,306
-
-
-
-
-
-
12,146
10,411
9,543
9,543
41,643
-
-
-
-
-
20,049
8,640
-
-
-
-
-
-
147,753
126,645
116,092
116,092
506,582
488,797
-
-
-
-
-
-
R. Velletri
949,300
(34,902)
65,671 104,925
20,049
30,322
- 1,135,365
9.24
Subtotal
Executive
Directors
1,361,300
(13,100)
91,977 104,925
40,098
38,962
- 1,624,162
6.46
Other Key Management Personnel
D. Foti
Z. Bebic
740,300
(33,822)
47,550 62,925
20,049
25,405
605,000
9,608
46,192 59,675
20,049
36,123
P. Trueman
460,000
(560)
35,328 45,800
20,049
13,669
-
-
-
862,407
776,647
574,286
Subtotal
Other Key
Management
Personnel
1,805,300
(24,774) 129,070 168,400
60,147
75,197
- 2,213,340
Total
3,604,957
(37,874) 247,629 273,325
141,888
114,159
- 4,344,084
# Leave reflects annual leave accrual less annual leave taken.
+ Non-monetary benefits consist of Directors and Officers, and Life and Salary Continuance, insurance premiums.
7.30
7.68
7.98
7.61
6.29
-
-
-
-
-
-
-
-
-
-
-
-
-
48 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Remuneration of Key Management Personnel (continued)
Table 3: Performance Rights: Granted during the year ended 30 June 2019
Terms and Conditions for Each Grant
Granted
Number
Grant Date
Fair Value
per Right at
Grant Date
Exercise
Price
per Right
Expiry Date
First
Exercise Date
Last
Exercise Date
Executive Directors
C. G. B. Rubino
R. Velletri
Non-Executive Directors
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
S. L. Murphy
Other Key Management
Personnel
D. Foti
Z. Bebic
P. Trueman
Total
-
-
-
20,011
20/11/2018
$13.01
-
-
-
-
-
12,000
11,381
8,734
52,126
-
-
-
-
-
-
-
-
-
-
6/8/18
2/7/18
2/7/18
$13.71
$13.99
$13.99
-
Nil
-
-
-
-
-
Nil
Nil
Nil
-
-
-
1/7/2021
1/7/2019
1/7/2021
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1/7/2021
1/7/2019
1/7/2021
1/7/2021
1/7/2019
1/7/2021
1/7/2021
1/7/2019
1/7/2021
Subsequent to 30 June 2019, the Board has approved the issue of additional Performance Rights relating to the 2018/19 financial year.
The rights will be issued based on the dividend reinvestment plan price for the 2019 final dividend to be determined in October 2019.
The value of the 2019 total award to each Key Management Personnel is set out in the table on page 45. It is estimated that
approximately 40,000 Performance Rights will be issued to Key Management Personnel under the terms of the CR Plan for the year ended
30 June 2019. The expiry date of these Performance Rights will be 1 July 2022, with the first exercise date being 1 July 2020 and the last
exercise date being 1 July 2022. The fair value of the Performance Rights has been estimated using the 30 June 2019 share price.
Table 4: Shares issued on exercise of Performance Rights during the year ended 30 June 2019
During the year ended 30 June 2019, no shares were issued on exercise of Performance Rights by Key Management Personnel.
Monadelphous Group Limited | Financial Report | 49
DIRECTORS’ REPORT
REMUNERATION REPORT (AUDITED) (continued)
Additional disclosures relating to options and shares
Table 5: Performance Rights holdings of Key Management Personnel
Performance Rights
held in Monadelphous
Group Limited
Balance at
Beginning of Period
1 July 2018
Granted as
Remuneration
Rights Exercised
and Lapsed
Net Change Other
Balance at
End of Period
30 June 2019
-
20,011
-
-
-
-
-
12,000
11,381
8,734
52,126
Balance at
End of Period
30 June 2019
1,022,653
2,100,000
78,000
40,000
2,852
8,278
-
-
-
-
10,000
-
4,200
-
(75,000)
54,316
-
-
-
-
(60,800)
3,306,099
Directors
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
S. L. Murphy
Executives
D. Foti
Z. Bebic
P. Trueman
Total
-
-
-
-
-
-
-
-
-
-
-
-
20,011
-
-
-
-
-
12,000
11,381
8,734
52,126
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
No Performance Rights had vested or were exercisable at 30 June 2019.
Table 6: Shareholdings of Key Management Personnel
Shares held in
Monadelphous Group
Limited
Balance at
Beginning of Period
1 July 2018
Granted as
Remuneration
On Exercise
of Options
Net Change Other
Directors
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
S. L. Murphy
Executives
D. Foti
Z. Bebic
P. Trueman
Total
1,022,653
2,100,000
78,000
30,000
2,852
4,078
-
129,316
-
-
3,366,899
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Loans to Key Management Personnel and their related parties
No directors or executives, or their related parties, had any loans during the reporting period.
Other transactions and balances with Key Management Personnel and their related parties
There were no other transactions and balances with Key Management Personnel or their related parties.
END OF REMUNERATION REPORT
50 | Monadelphous Group Limited | Annual Report 2019
DIRECTORS’ REPORT
DIRECTORS’ MEETINGS
The number of meetings of directors (including meetings of committees of directors) held during the year and the number of meetings
attended by each director are shown in the table below.
Directors’ Meetings
Audit
Remuneration
Nomination
Meetings of Committees
Number of meetings held:
Number of meetings attended:
C. G. B. Rubino
R. Velletri
P. J. Dempsey
C. P. Michelmore
D. R. Voss
H. J. Gillies
S. L. Murphy^
13
13
13
13
12
13
13
1
6
-
-
6
-
6
6
-
2
-
-
-
2
2
2
-
2
2
-
2
2
2
2
-
^ S.L. Murphy was appointed as a Non-Executive Director on 11 June 2019 and attended all meetings she was eligible to attend.
COMMITTEE MEMBERSHIP
As at the date of this report, the Company had an audit committee, a remuneration committee and a nomination committee.
Members acting on the committees of the Board during the year were:
Audit
P. J. Dempsey (c)
D. R. Voss
H. J. Gillies
Remuneration
C. P. Michelmore (c)
D. R. Voss
H. J. Gillies
Note: (c) Designates the chair of the committee.
ROUNDING
Nomination
C. G. B. Rubino (c)
C. P. Michelmore
P. J. Dempsey
H. J. Gillies
D. R. Voss
The amounts contained in this report and in the financial report have been rounded to the nearest thousand dollars ($’000) (where rounding
is applicable) under the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument
2016/191. The Company is an entity to which the legislative instrument applies.
CORPORATE GOVERNANCE
In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Monadelphous Group Limited
support and have adhered to the principles of Corporate Governance. The Company’s Corporate Governance Statement is detailed on the
Company’s website.
Monadelphous Group Limited | Financial Report | 51
DIRECTORS’ REPORT
AUDITOR INDEPENDENCE AND NON-AUDIT SERVICES
The directors have received an independence declaration from the auditor of Monadelphous Group Limited, as shown on page 53.
The following non-audit services were provided by the entity’s auditor, Ernst & Young. The directors are satisfied that the provision
of non-audit services is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001.
The nature and scope of each type of non-audit service provided means that auditor independence was not compromised.
Ernst & Young received or are due to receive the following amounts for the provision of non-audit services:
Tax compliance services
Signed in accordance with a resolution of the directors.
$
36,089
C. G. B. Rubino
Chairman
Perth, 19 August 2019
52 | Monadelphous Group Limited | Annual Report 2019
AUDITOR’S INDEPENDENCE DECLARATION
Monadelphous Group Limited | Financial Report | 53
INDEPENDENT AUDIT REPORT
54 | Monadelphous Group Limited | Annual Report 2019
INDEPENDENT AUDIT REPORT
Monadelphous Group Limited | Financial Report | 55
INDEPENDENT AUDIT REPORT
56 | Monadelphous Group Limited | Annual Report 2019
INDEPENDENT AUDIT REPORT
Monadelphous Group Limited | Financial Report | 57
INDEPENDENT AUDIT REPORT
58 | Monadelphous Group Limited | Annual Report 2019
DIRECTOR’S DECLARATION
In accordance with a resolution of the Directors of Monadelphous Group Limited, I state that:
1) In the opinion of the directors:
(a) the financial statements, notes and the additional disclosures included in the Directors’ Report designated as audited,
of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the consolidated entity’s financial position as at 30 June 2019 and of its performance for the year
ended on that date; and
(ii) complying with Accounting Standards and Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the consolidated entity will be able to pay its debts as and when they become due
and payable; and
(c) the financial statements and notes also comply with International Financial Reporting Standards as disclosed on page 65.
2) This declaration has been made after receiving the declarations required to be made to the directors in accordance with section 295A of
the Corporations Act 2001 for the year ended 30 June 2019.
3) In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the members of the closed
group identified in note 20 will be able to meet any obligations or liabilities to which they are or may become subject to, by virtue of the
Deed of Cross Guarantee.
On behalf of the Board
C. G. B. Rubino
Chairman
Perth, 19 August 2019
Monadelphous Group Limited | Financial Report | 59
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 30 JUNE 2019
Continuing Operations
REVENUE
Cost of services rendered
GROSS PROFIT
Other income
Business development and tender expenses
Occupancy expenses
Administrative expenses
Finance costs
Share of profit from joint ventures
Unrealised foreign currency gain
PROFIT BEFORE INCOME TAX
Income tax expense
PROFIT AFTER INCOME TAX
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
NON-CONTROLLING INTERESTS
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Notes
2019
$’000
2018
$’000
1
1
2
11
3
4
4
1,479,737
1,737,632
(1,351,482)
(1,590,821)
128,255
146,811
5,737
(20,755)
(3,675)
(31,759)
(1,930)
7,144
409
5,430
(17,595)
(3,525)
(29,871)
(452)
374
1,673
83,426
102,845
(31,313)
(30,570)
52,113
72,275
50,565
1,548
52,113
53.72
53.62
71,479
796
72,275
76.11
76.07
60 | Monadelphous Group Limited | Annual Report 2019
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 JUNE 2019
NET PROFIT FOR THE YEAR
OTHER COMPREHENSIVE INCOME
Items that may be reclassified subsequently to profit or loss:
Net gain on available-for-sale financial asset
Income tax effect
Foreign currency translation
Items that will not be reclassified subsequently to profit or loss:
Net gain on equity instruments designated at fair value through other comprehensive income
Income tax effect
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR, NET OF TAX
2019
$’000
2018
$’000
52,113
72,275
-
-
-
275
275
115
(34)
81
356
905
(271)
634
(910)
(276)
-
-
-
(276)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR, NET OF TAX
52,469
71,999
ATTRIBUTABLE TO:
EQUITY HOLDERS OF THE PARENT
NON-CONTROLLING INTERESTS
50,921
1,548
52,469
71,203
796
71,999
Monadelphous Group Limited | Financial Report | 61
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 JUNE 2019
Notes
2019
$’000
2018
$’000
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Inventories
Income tax receivable
Total current assets
Non-current assets
Property, plant and equipment
Contract assets
Intangible assets and goodwill
Investment in joint venture
Deferred tax assets
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Provisions
Deferred tax liabilities
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Non-Controlling Interests
TOTAL EQUITY
62 | Monadelphous Group Limited | Annual Report 2019
5
6
7
8
3
9
7
10
11
3
12
13
14
3
15
14
15
3
18
19
19
164,042
322,849
29,372
4,607
205
208,773
288,371
-
47,200
-
521,075
544,344
115,437
101,983
289
3,120
7,980
34,164
2,921
163,911
-
3,120
1,437
35,304
2,806
144,650
684,986
688,994
184,341
10,868
-
63,053
258,262
27,361
4,542
140
32,043
164,008
7,944
8,522
94,106
274,580
13,027
5,259
-
18,286
290,305
292,866
394,681
396,128
128,723
33,707
231,006
393,436
1,245
394,681
125,703
30,292
238,486
394,481
1,647
396,128
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 JUNE 2019
At 1 July 2018 as restated
125,703
29,662
Attributable to equity holders
Share-Based
Payment
Reserve
$’000
Foreign
Currency
Translation
Reserve
$’000
Retained
Earnings
$’000
Non-
controlling
Interests
$’000
Issued Capital
$’000
Fair Value
Reserve for
Financial
Assets at
FVOCI^
$’000
Total
$’000
125,703
29,662
(191)
238,486
1,647
821
396,128
-
-
-
-
-
-
-
-
-
3,020
-
-
-
-
2,953
106
-
-
-
-
(191)
275
(4,127)
(245)
-
-
234,114
1,647
-
-
-
50,565
1,548
-
-
821
81
-
(4,127)
(245)
391,756
356
52,113
275
50,565
1,548
81
52,469
-
-
-
-
-
-
-
-
-
-
(53,673)
(1,950)
-
-
-
-
2,953
106
3,020
(55,623)
128,723
32,721
84
231,006
1,245
902
394,681
At 1 July 2018
as previously stated
Opening balance adjustment
on application of AASB 15*
Opening balance adjustment
on application of AASB 9*
Other comprehensive income
Profit for the period
Total comprehensive
income for the period
Transactions with owners
in their capacity as owners
Share-based payments
Adjustment to deferred tax
asset recognised on employee
share trust
Dividend reinvestment plan
Dividends paid
At 30 June 2019
Attributable to equity holders
Share-Based
Payment
Reserve
$’000
Foreign
Currency
Translation
Reserve
$’000
Issued Capital
$’000
Retained
Earnings
$’000
Non-
controlling
Interests
$’000
Available-
for-sale
Reserve
$’000
Total
$’000
378,244
(276)
72,275
71,999
187
634
-
634
-
-
-
(480)
2,738
(56,373)
At 1 July 2017
122,965
30,142
Other comprehensive income
Profit for the period
Total comprehensive
income for the period
Transactions with owners
in their capacity as owners
Share-based payments
Dividend reinvestment plan
Dividends paid
At 30 June 2018
-
-
-
-
2,738
-
-
-
-
(480)
-
-
719
(910)
223,380
-
-
71,479
(910)
71,479
-
-
-
-
-
(56,373)
851
-
796
796
-
-
-
125,703
29,662
(191)
238,486
1,647
821
396,128
^ Previously Available-for-sale reserve
* Refer to note 31 for details of the opening balance adjustments made on application of the new accounting standards applicable for the Group from 1 July 2018
Monadelphous Group Limited | Financial Report | 63
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 JUNE 2019
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Borrowing costs
Other income
Income tax paid
Dividends received
Notes
2019
$’000
2018
$’000
1,596,337
1,873,522
(1,546,389)
(1,793,937)
2,269
(1,930)
2,295
2,573
(493)
2,496
(36,816)
(32,692)
199
178
NET CASH FLOWS FROM OPERATING ACTIVITIES
5
15,965
51,647
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Repayment of loans to joint ventures and associates
Payment of loans to joint ventures and associates
Acquisition of controlled entities
4,970
(19,707)
600
-
-
3,442
(25,039)
1,833
(2,449)
(1,414)
NET CASH FLOWS USED IN INVESTING ACTIVITIES
(14,137)
(23,627)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividend paid
Proceeds from borrowings
Repayment of borrowings
Payment of finance leases
(52,603)
15,054
(300)
(9,995)
(53,635)
-
(1,500)
(6,400)
NET CASH FLOWS USED IN FINANCING ACTIVITIES
(47,844)
(61,535)
NET DECREASE IN CASH AND CASH EQUIVALENTS
Net foreign exchange differences
Cash and cash equivalents at beginning of period
(46,016)
1,285
208,773
(33,515)
379
241,909
CASH AND CASH EQUIVALENTS AT END OF PERIOD
5
164,042
208,773
64 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GENERAL INFORMATION
FOR THE YEAR ENDED 30 JUNE 2019
GENERAL INFORMATION
The consolidated financial report of Monadelphous Group Limited (the Group) and its subsidiaries for the year ended 30 June 2019 was
authorised for issue in accordance with a resolution of directors on 19 August 2019.
Monadelphous Group Limited is a for profit company limited by shares incorporated and domiciled in Australia whose shares are publicly
traded on the Australian Securities Exchange. The Group’s registered office is 59 Albany Highway, Victoria Park, Western Australia.
The nature of the operations and principal activities of the Group are described in the Directors’ Report.
Basis of preparation
The financial report is a general purpose financial report, which:
• has been prepared in accordance with the requirements of the Corporations Act 2001, Australian Accounting Standards and other
authoritative pronouncements of the Australian Accounting Standards Board (“AASB”) and International Financial Reporting Standards
(IFRS) as issued by the International Accounting Standards Board as applicable to a for-profit entity.
• has also been prepared on a historical cost basis except for certain financial assets that have been measured at fair value.
•
is presented in Australian dollars and all values are rounded to the nearest thousand dollars ($’000) unless otherwise stated under
the option available to the Company under ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191.
The Company is an entity to which the legislative instrument applies.
• adopts all new and amended Accounting Standards and Interpretations issued by the AASB that are relevant to the operations of the
Group and effective for reporting periods beginning on or before 1 July 2018 (Refer to note 31).
• does not early adopt any Accounting Standards and Interpretations that have been issued or amended but are not yet effective.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Group and its subsidiaries as at 30 June 2019. Control is
achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect
those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights results in control.
A list of controlled entities (subsidiaries) at year end is contained in note 20. Consolidation of the subsidiary begins when the Group obtains
control over the subsidiary and ceases when the Group loses control over the subsidiary. Assets, liabilities, income and expenses of a
subsidiary acquired or disposed during the year are included in the consolidated financial statements from the date the Group gains control
until the date the Group ceases to control the subsidiary.
The financial statements of subsidiaries are prepared for the same reporting period as the parent company, using consistent accounting
policies. Adjustments are made to bring into line any dissimilar accounting policies that may exist.
In preparing the consolidated financial statements, all intercompany balances and transactions, income and expenses and profit and losses
resulting from intra-group transactions have been eliminated.
Profit or loss and each component of other comprehensive income are attributed to the equity holders of the parent of the Group and to the
non-controlling interests, even if this results in the non-controlling interests having a debit balance.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination shall be
measured at fair value, which shall be calculated as the sum of the acquisition date fair values of the assets transferred by the acquirer,
the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer. Acquisition-related costs
are expensed as incurred.
Foreign currency translation
Functional and presentation currency
Each entity in the Group determines its own functional currency. Both the functional and presentation currencies of Monadelphous Group
Limited, its Australian subsidiaries and its Papua New Guinea subsidiary (Monadelphous PNG Ltd) are Australian dollars (A$).
The functional currency is United States dollars (US$) for the Hong Kong subsidiary (Moway International Limited), the Singapore subsidiary
(Monadelphous Singapore Pte Ltd) and the US subsidiaries (Monadelphous Inc. and Monadelphous Marcellus LLC). The functional currency
of the Chinese subsidiary (Moway AustAsia Steel Structures Trading (Beijing) Company Limited) is Chinese Renminbi (RMB). The functional
currency of the New Zealand subsidiary (Monadelphous Engineering NZ Pty Ltd) is New Zealand dollars (NZD). The functional currency of
the Mongolian subsidiary (Monadelphous Mongolia LLC) is Mongolian Tugrik (MNT).
Monadelphous Group Limited | Financial Report | 65
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GENERAL INFORMATION
FOR THE YEAR ENDED 30 JUNE 2019
GENERAL INFORMATION (continued)
Foreign currency translation (continued)
Transactions and balances
Transactions in foreign currencies are initially recorded in the functional currency by applying the exchange rate ruling at the date of transaction.
Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the reporting date.
Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate as at the date
of the initial transaction.
Translation of Group companies’ functional currency to presentation currency
As at the reporting date the assets and liabilities of the foreign operations are translated into the presentation currency of Monadelphous Group
Limited at the rate of exchange ruling at the reporting date and the income statements are translated at the weighted average exchange rates
for the year. Exchange variations arising from the translation are recognised in the foreign currency translation reserve in equity.
Other accounting policies
Significant and other accounting policies that summarise the measurement basis used and are relevant to an understanding of the financial
statements are provided throughout the notes to the financial statements or at note 31.
Key judgements and estimates
The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported
amounts in the financial statements. Actual results may differ from these estimates under different assumptions and conditions and may
materially affect financial results or the financial position reported in future periods. Management have identified the following critical
accounting policies for which significant judgements, estimates and assumptions are made:
Revenue from contracts with customers
Where performance obligations are satisfied over time, revenue is recognised in the consolidated income statement by reference to the
progress towards complete satisfaction of each performance obligation.
For construction contracts, revenue is recognised using an output method based on work certified to date which the Group believes depicts
the transfer of goods and services as it is based on completed work as agreed by our customers.
Fundamental to this calculation is a reliable estimate of the transaction price (total contract revenue). In determining the transaction price,
variable consideration including claims and certain contract variations are only included to the extent it is highly probable that a significant
reversal in revenue will not occur in the future. Where a variation in scope has been agreed with the customer but the corresponding change
in the transaction price has not been agreed the variation is accounted for as variable consideration. The estimate of variable consideration is
determined using the expected value approach taking into account the facts and circumstances of each individual contract and the historical
experience of the Group and is reassessed throughout the life of the contract.
When it is probable that total contract costs will exceed total contract revenue, the contract is considered onerous and the present obligation
under the contract is recognised immediately as a provision. Key assumptions regarding costs to complete contracts include estimation of
labour, technical costs, impact of delays and productivity.
Taxation
Judgement is required in assessing whether deferred tax assets and certain deferred tax liabilities are recognised in the consolidated statement of
financial position. Deferred tax assets, including those arising from unrecouped tax losses, capital losses and temporary differences, are recognised
only where it is considered more likely than not that they will be recovered, which is dependent on the generation of sufficient future taxable profits.
Assumptions about the generation of future taxable profits depend on management’s estimates of future cash flows. Judgements are also required
about the application of income tax legislation. These judgements and assumptions are subject to risk and uncertainty, hence there is a possibility
that changes in circumstances will alter expectations, which may impact the amount of deferred tax assets and deferred tax liabilities recognised in
the statement of financial position and the amount of other tax losses and temporary differences not yet recognised. In such circumstances, some or
all of the carrying amounts of recognised deferred tax assets and liabilities may require adjustments, resulting in a corresponding credit or charge to
the income statement.
Impairment
Refer to notes 6 and 9 for details.
Workers Compensation
Refer note 15 for details.
Consolidation of MGJV Pty Ltd
Refer to note 20 for details.
66 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
1. REVENUE AND OTHER INCOME
Revenue from contracts with customers
Services revenue
Construction revenue
Finance revenue
Dividends received
Net gains on disposal of property, plant and equipment
Other income
Disaggregation of revenue from contracts with customers by end customer industry:
Oil and gas
Other minerals
Iron Ore
Infrastructure
Coal
Less share of revenue from joint ventures accounted for using the equity method
The following amounts are included in revenue from contracts with customers:
Revenue recognised as a contract liability in the prior period
Revenue from performance obligations satisfied in prior periods
Unsatisfied performance obligations
Transaction price expected to be recognised in future years for unsatisfied performance obligations
at 30 June 2019:
Services revenue
Construction revenue
Total
2019
$’000
2018*
$’000
998,435
478,834
841,081
893,800
1,477,269
1,734,881
2,269
199
2,573
178
1,479,737
1,737,632
3,442
2,295
5,737
594,868
219,918
368,164
282,090
143,237
2,934
2,496
5,430
1,043,560
240,962
217,098
203,508
78,871
1,608,277
1,783,999
(131,008)
(49,118)
1,477,269
1,734,881
24,872
8,500
2,137,094
405,869
2,542,963
In line with the Group’s accounting policy described following, the transaction price expected to be recognised in future years excludes
variable consideration that is constrained.
The average duration of contracts is given below, however some contracts will vary from these typical lengths. Revenue is typically
earned over these varying timeframes.
Services:
1 to 5 years
Construction: 1 to 2 years
* The comparative information has not been restated following the adoption of AASB 15 and continues to be reported under the previous accounting policy. Refer to note 31 for
further details.
Monadelphous Group Limited | Financial Report | 67
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
1. REVENUE AND OTHER INCOME (continued)
Recognition and measurement – effective from 1 July 2018
Revenue from contracts with customers
The Group is in the business of providing construction and maintenance services. Revenue from contracts with customers is recognised
when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group is
expected to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue
arrangements because it typically controls the goods and services before transferring them to the customer.
Construction services
Construction contracts are assessed to identify the performance obligations contained in the contract. The total transaction price is
allocated to each individual performance obligation. Typically, the Group’s construction contracts contain a single performance obligation.
Work is performed on assets that are controlled by the customer or on assets that have no alternative use to the Group, with the Group
having right to payment for performance to date. As performance obligations are satisfied over time, revenue is recognised over time
using an output method based on work certified to date.
Customers are typically invoiced on a monthly basis and invoices are paid on normal commercial terms.
Services contracts
Contracts for performance of maintenance activities cover servicing of assets and involve various activities. These activities tend to be
substantially the same with the same pattern of transfer to the customer. Where this is the case, which is the majority of the services contracts,
these services are taken to be one performance obligation and the total transaction price is allocated to the performance obligation identified.
Performance obligations are fulfilled over time as the Group largely enhances assets which the customer controls. Customers are
typically invoiced monthly for an amount that is calculated on either a schedule of rates or a cost plus basis. For these contracts,
the transaction price is determined as an estimate of this variable consideration.
Variable consideration
If the consideration in the contract includes a variable amount, the Group estimates the amount of the consideration to which
it is entitled in exchange for transferring the goods and services to the customer. The Group includes some or all of this variable
consideration in the transaction price only to the extent it is highly probable that a significant reversal of the cumulative revenue
recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved.
Certain contracts are subject to claims which are enforceable under the contract. If the claim does not result in any additional goods
or services, the transaction price is updated and the claim accounted for as variable consideration.
Significant financing component
Using the practical expedient in AASB 15, the Group does not adjust the promised amount of consideration for the effects of a
significant financing component if it expects, at contract inception, that the period between the transfer or the promised good or service
to the customer and when the customer pays for that good or service will be one year or less.
Interest income
Revenue is recognised as interest accrues using the effective interest method.
Recognition and measurement – policies applied prior to 1 July 2018
Revenue was recognised and measured at the fair value of the consideration received or receivable to the extent that it was probable
that the economic benefits would flow to the Group and the revenue could be reliably measured. The following specific recognition
criteria must also have been met before revenue was recognised:
Rendering of Services
Where the contract outcome could be reliably measured, revenue was recognised as services were rendered to the customer for
maintenance contracts. For construction contracts refer to the accounting policy below.
Where the contract outcome could not be reliably measured, contract costs were recognised as an expense as incurred, and where
it was probable that the costs would be recovered, revenue was recognised only to the extent that costs had been incurred. This also
applied to construction contracts.
Construction contracts
Revenue arising from fixed price contracts was recognised in accordance with the percentage of completion method. Stage of completion
was agreed with the customer on a work certified to date basis, as a percentage of the overall contract. Revenue from cost plus contracts
was recognised by reference to the recoverable costs incurred plus a percentage of fees earned during the financial year. The percentage
of fees earned during the financial year was based on the stage of completion of the contract.
Where a loss was expected to occur from a construction contract the excess of the total expected contract costs over expected contract
revenue was recognised as an expense immediately.
68 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
2. EXPENSES
Finance costs
Loans and overdrafts
Finance charges payable under finance leases and hire purchase contracts
Tax shortfall interest charge
Depreciation and amortisation
Depreciation expense
Amortisation of intangible assets
Amortisation of deferred contract fulfilment costs
Employee benefits expense
Employee benefits expense
Defined contribution superannuation expense
Lease payments and other expenses
Minimum lease payments – operating lease
Government grants included in the income statement
Recognition and measurement
2019
$’000
2018
$’000
62
1,048
820
1,930
19,490
-
1,306
20,796
772,161
53,871
826,032
14
438
-
452
17,222
625
-
17,847
923,451
64,189
987,640
10,966
12,971
-
2,501
Finance costs
The Group does not currently hold qualifying assets but, if it did, the borrowing costs directly associated with the qualifying assets
would be capitalised. All other finance costs are expensed as incurred.
Depreciation and amortisation
Refer to notes 9 and 10 for details on depreciation and amortisation.
Employee benefits expense
Refer to note 15 for employee benefits expense and note 26 for share-based payments expense.
Contributions to defined contribution superannuation plans are recognised as an expense as they become payable.
Operating leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.
The minimum lease payments of operating leases are recognised as an expense on a straight line basis over the lease term.
Government grants
The Group recognises the excess of the research and development (R&D) tax offset over the statutory rate (the R&D offset) being an
additional 8.5% deduction as a government grant when there is reasonable assurance it will be received and any attached conditions
will be complied with. As the grant relates to R&D expenditure already incurred it is recognised in the income statement in the period it
became receivable as a reduction to cost of sales. The Group has not claimed or recognised the R&D tax offset for the current year.
Monadelphous Group Limited | Financial Report | 69
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
3.
INCOME TAX
The major components of income tax expense are:
Income statement
Current income tax
Current income tax charge
Adjustments in respect of previous years
Deferred income tax
Temporary differences
Income tax expense reported in the income statement
Statement of Comprehensive Income
Deferred tax related to items recognised in Statement of Comprehensive income during the year:
Unrealised gain on equity instrument designated at fair value through other comprehensive income
Amounts credited directly to equity
Share based payment
Income tax benefit reported in equity
Tax reconciliation
A reconciliation between tax expense and the product of accounting profit before
income tax multiplied by the Group’s applicable income tax rate is as follows:
Accounting profit before income tax
Income tax rate of 30% (2018: 30%)
- Share based payment expense
- R&D repayment*/(receipt)
- Other
Aggregate income tax expense
2019
$’000
2018
$’000
26,338
1,757
3,218
31,313
34
34
(106)
(106)
83,426
25,028
389
6,311
(415)
34,791
644
(4,865)
30,570
271
271
-
-
102,845
30,854
240
(750)
226
31,313
30,570
* During the period, the Company made a one-off provision net of interest totalling $6,311,000. The provision resulted from the receipt of Notices of Amended Assessments
from the Australian Taxation Office relating to the 2015 and 2016 income years. The amended assessments relate to Research and Development tax incentives claimed
by the Company in those years which were subsequently deemed to be ineligible.
70 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
2019
$’000
Current
Income Tax
2019
$’000
Deferred
Income Tax
2018
$’000
Current
Income Tax
2018
$’000
Deferred
Income Tax
3.
INCOME TAX (continued)
Recognised deferred tax assets and liabilities
Opening balance
(8,522)
35,304
(3,603)
25,966
Opening balance adjustment on application of
AASB 15 and AASB 9 (refer note 31)
Charged to income
Charged to equity
Other / payments
Closing balance
Amounts recognised on the consolidated
statement of financial position:
Deferred tax asset
Deferred tax liability
-
(28,095)
-
36,822
205
1,873
(3,218)
72
(7)
34,024
34,164
(140)
34,024
Deferred income tax at 30 June relates to the following:
Deferred tax assets
Provisions
Depreciation
Other
Gross deferred tax assets
Set-off of deferred tax liabilities
Net deferred tax assets
Deferred tax liabilities
Accelerated depreciation
Other
Gross deferred tax liabilities
Set-off against deferred tax assets
Net deferred tax liabilities
-
(35,435)
-
30,516
(8,522)
2019
$’000
28,842
-
6,148
34,990
(826)
34,164
(288)
(678)
(966)
826
(140)
-
4,865
(271)
4,744
35,304
35,304
-
35,304
2018
$’000
29,709
1,425
4,875
36,009
(705)
35,304
-
(705)
(705)
705
-
Monadelphous Group Limited | Financial Report | 71
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
3.
INCOME TAX (continued)
Unrecognised temporary differences
At 30 June 2019, there are no unrecognised temporary differences associated with the Group’s investments in subsidiaries.
Tax consolidation
Monadelphous Group Limited and its 100% owned Australian resident subsidiaries formed a tax consolidated group with effect from
1 July 2003. Members of the tax consolidated group have entered into a tax funding agreement. The head entity, Monadelphous
Group Limited and the controlled entities in the tax consolidated group continue to account for their own current and deferred
tax amounts. The Group has applied the Group allocation approach in determining the appropriate amount of current taxes and
deferred taxes to allocate to members of the tax consolidated group.
In addition to its own current and deferred tax amounts, Monadelphous Group Limited also recognises the current tax liabilities
(or assets) and the deferred tax assets arising from unused tax losses and unused tax credits assumed from controlled entities in
the tax consolidated group.
Assets or liabilities arising under tax funding agreements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the Group.
Any difference between the amounts assumed and amounts receivable or payable under the tax funding agreement are recognised
as a contribution to (or distribution from) wholly-owned tax consolidated entities.
Recognition and measurement
Current taxes
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to
the taxation authorities based on the current period’s taxable income. The tax rates and tax laws used to compute the amount are those
that are enacted or substantively enacted by the reporting date.
Deferred Taxes
Deferred income tax is provided for using the full liability balance sheet approach.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the reporting
date. Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists and they relate to the same
taxable entity and the same taxation authority.
72 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
PERFORMANCE
FOR THE YEAR ENDED 30 JUNE 2019
4. EARNINGS PER SHARE
The following reflects the income and share data used in the calculation of basic
and diluted earnings per share:
Net profit attributable to ordinary equity holders of the parent
Earnings used in calculation of basic and diluted earnings per share
2019
$’000
2018
$’000
50,565
50,565
71,479
71,479
Number
Number
Number of shares
Weighted average number of ordinary shares on issue used in the calculation
of basic earnings per share
94,127,723
93,916,738
Effect of dilutive securities
Shares issuable associated with Arc West Group Pty Ltd acquisition
Performance Rights
Adjusted weighted average number of ordinary shares used in calculating diluted
earnings per share
Conversions, calls, subscriptions or issues after 30 June 2019:
On 1 July 2019, 82,771 Performance Rights vested and were exercised.
Calculation of earnings per share
-
166,737
49,372
-
94,294,460
93,966,110
Basic earnings per share is calculated as net profit attributable to members of the parent, adjusted to exclude any costs of servicing
equity (other than dividends), divided by the weighted average number of ordinary shares, adjusted for any bonus element.
Diluted EPS is calculated as net profit attributable to members of the parent, adjusted for:
• costs of servicing equity (other than dividends);
• the after tax effect of dividends and interest associated with dilutive potential ordinary shares that have been recognised as
expenses; and
• other non-discretionary changes in revenues or expenses during the period that would result from the dilution of potential
ordinary shares;
divided by the weighted average number of ordinary shares and dilutive potential ordinary shares, adjusted for any bonus element.
Monadelphous Group Limited | Financial Report | 73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
5. CASH AND CASH EQUIVALENTS
For the purposes of the statement of cash flows, cash and cash
equivalents comprise the following at 30 June:
Cash balances comprise:
Cash at bank
Short term deposits
Reconciliation of net profit after tax to the net cash flows from
operating activities
Net profit
Adjustments for
Depreciation of non-current assets
Amortisation and impairment of intangible assets
Net profit on sale of property, plant and equipment
Share-based payment expense/(credit)
Unrealised foreign exchange gain
Share of profits from joint ventures
Other
Changes in assets and liabilities
Increase in receivables
Decrease in inventories
Increase in contract assets
Decrease/(increase) in deferred tax assets
Increase/(decrease) in payables
(Decrease)/increase in provisions
(Decrease)/increase in income tax payable
Increase/(decrease) in deferred tax liabilities
Net cash flows from operating activities
Non-cash financing and investing activities
2019
$’000
2018
$’000
161,173
2,869
164,042
183,773
25,000
208,773
52,113
72,275
19,490
1,306
(3,442)
2,953
(409)
(7,144)
(2,101)
(34,659)
36,698
(31,136)
3,085
19,568
(31,770)
(8,727)
140
15,965
17,222
625
(2,934)
(480)
(1,673)
(374)
1,678
(40,086)
22,682
-
(9,252)
(20,172)
7,231
4,919
(14)
51,647
Hire purchase transactions:
During the year, the consolidated entity acquired plant and equipment by means of hire purchase agreements with an aggregate fair
market value of $12,498,577 (2018: $15,152,164).
Reconciliation of liabilities arising from financing activities
Hire purchase liabilities
Loan
Recognition and measurement
2018
$ ’000
20,971
-
20,971
Cash flows
$’000
Non-cash changes
New leases
$’000
1,459
3,300
4,759
12,499
-
12,499
2019
$’000
34,929
3,300
38,229
Cash and cash equivalents in the consolidated statement of financial position comprise cash at bank and on hand and short term
deposits with an original maturity of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value, net of outstanding bank overdrafts.
74 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
6. TRADE AND OTHER RECEIVABLES
CURRENT
Trade receivables
Less allowance account for impairment losses
Other debtors
Less allowance account for impairment losses
Trade receivables generally have 30 to 60 days terms.
Allowance account for trade receivables impairment losses
Movements in loss allowance based on lifetime ECL:
Balance at the beginning of the year
AASB 15 transition adjustment
Balance at the beginning of the year - restated
Increase in loss allowance
Balance at the end of the year
Recognition and measurement
Trade receivables – effective 1 July 2018
Refer to accounting policies of financial assets in note 31 Financial Assets.
2019
$’000
2018
$’000
252,636
(3,634)
249,002
74,117
(270)
217,611
(3,643)
213,968
74,403
-
322,849
288,371
3,643
(181)
3,462
172
3,634
2,794
-
2,794
849
3,643
Other debtors - effective 1 July 2018
Other debtors include contract assets that are unconditional (see note 7). These assets are reclassified to trade receivables when invoiced.
Trade receivables – policy applied prior to 1 July 2018
Trade receivables are recognised and carried at original invoice amount less an allowance for any uncollectable amounts. Bad debts
are written off when identified.
Collectability of trade receivables is reviewed on an ongoing basis at a Company and business unit level. An impairment provision
is recognised where there is objective evidence that the Group will not be able to collect the receivables. Financial difficulties of the
debtor, default payments, historical bad debt performance or debts more than 60 days overdue are considered objective evidence of
impairment. The amount of the impairment loss is the receivable carrying amount compared to the present value of estimated future
cash flows, discounted at the original effective interest rate.
Other debtors - policy applied prior to 1 July 2018
Other debtors include accrued sales which are non-interest bearing and have repayment terms between 30 to 60 days.
Monadelphous Group Limited | Financial Report | 75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
7. CONTRACT ASSETS
CURRENT
Contract assets
NON CURRENT
Contract assets
2019
$’000
29,372
289
Contract assets are net of expected credit losses of $275,000. Included in contract assets are deferred project fulfilment costs of $455,000.
Significant changes in contract assets
Prior to the initial application of AASB 15, contract assets were disclosed within Inventories. The contract asset balance at 30 June 2019
has increased when compared with the balance on transition as at 1 July 2018 (refer to note 31) as a result of changes in the progress of
completion and the timing of invoicing.
Recognition and measurement
Contract assets – effective from 1 July 2018
A contract asset is the right to consideration in exchange for goods or services transferred to the customer. If the Group transfers goods
or services to a customer before the customer pays consideration or before payment is due, a contract asset is recognised for the earned
consideration. If the Group’s right to an amount of consideration is unconditional (other than the passage of time), the contract asset is
classified as a receivable.
Refer to accounting policies of revenue from contracts with customers in note 1.
Project fulfilment costs - effective 1 July 2018
If project fulfilment costs are within the scope of AASB 15, the Group recognises these costs as an asset only if the costs relate directly
to a contract, the costs generate or enhance resources and the costs are expected to be recovered.
These costs are amortised on a systematic basis that is consistent with the transfer of goods and services under the contract. If not
capitalised, project fulfilment costs are expensed as incurred.
76 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
8.
INVENTORIES
Construction work in progress
Cost incurred to date plus profit recognised
Consideration received and receivable as progress billings
Represented by:
Amounts due to customers
Amounts due from customers
Raw materials and consumables
Recognition and measurement
Notes
2019
$’000
2018
$’000
1,432,940
(1,451,339)
(18,399)
65,599
47,200
13
4,607
Construction work-in-progress – policies applied prior to 1 July 2018
For the comparative period, construction work-in-progress was stated at the aggregate of contract costs incurred to date plus profits
recognised to date (see note 1 for the accounting policy for revenue recognition) less recognised losses and progress billings. Costs included
all costs directly related to specific contracts.
Advances received for construction work not yet commenced or for committed subcontractor work not yet received are recognised
as a current liability in trade and other payables.
Following the adoption of AASB 15, amounts previously disclosed as construction work-in-progress are now disclosed as receivables
(refer note 6), contract assets (refer to note 7) or contract liabilities (refer to note 13).
Raw materials and consumables
Raw materials and consumables are stated at the lower of cost and net realisable value. Prior to the adoption of AASB 15 on
1 July 2018, raw materials and consumables directly related to specific contracts were included in construction work in progress.
Monadelphous Group Limited | Financial Report | 77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
9. PROPERTY, PLANT AND EQUIPMENT
Reconciliation of carrying amounts at the beginning and end of the period
Property
Plant and Equipment
Freehold Land
$’000
Buildings
$’000
Plant and
Equipment
$’000
Plant and
Equipment Under
Hire Purchase
$’000
Year ended 30 June 2019
Net carrying amount at 1 July 2018
Additions
Assets transferred
Disposals
Depreciation charge
Exchange differences
13,411
1,400
-
-
-
-
16,425
2,276
-
(5)
46,762
18,260
(9,209)
(1,523)
25,385
12,499
9,209
-
(1,085)
(13,265)
(5,140)
-
37
-
Total
$’000
101,983
34,435
-
(1,528)
(19,490)
37
Net carrying amount at 30 June 2019
14,811
17,611
41,062
41,953
115,437
At 30 June 2019
Gross carrying amount – at cost
Accumulated depreciation
Net carrying amount
Year ended 30 June 2018
14,811
-
14,811
28,647
(11,036)
17,611
166,842
(125,780)
41,062
Net carrying amount at 1 July 2017
13,411
17,197
Additions
Acquired through business combination
Assets transferred
Disposals
Depreciation charge
Exchange differences
-
-
-
-
-
-
278
11
-
-
(1,061)
-
Net carrying amount at 30 June 2018
13,411
16,425
31,121
24,761
672
4,148
(508)
(13,219)
(213)
46,762
51,436
(9,483)
41,953
17,323
15,152
-
(4,148)
-
261,736
(146,299)
115,437
79,052
40,191
683
-
(508)
(2,942)
(17,222)
-
(213)
25,385
101,983
At 30 June 2018
Gross carrying amount – at cost
Accumulated depreciation
Net carrying amount
13,411
-
13,411
26,499
(10,074)
16,425
173,372
(126,610)
46,762
32,170
(6,785)
25,385
245,452
(143,469)
101,983
Property, plant and equipment pledged as security
Assets under hire purchase are pledged as security for the associated hire purchase liabilities.
Assets pledged as security
2019
$’000
41,953
2018
$’000
25,385
78 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
9. PROPERTY, PLANT AND EQUIPMENT (continued)
Recognition and measurement
Property, plant and equipment
All classes of property, plant and equipment are stated at historical cost less accumulated depreciation and any accumulated
impairment losses. Such cost includes the cost of replacing parts that are eligible for capitalisation when the cost of replacing the
parts is incurred. Similarly, when each major inspection is performed, its cost is recognised in the carrying amount of the plant and
equipment as a replacement only if it is eligible for capitalisation. All other repairs and maintenance are recognised in the income
statement as incurred.
Depreciation is calculated on a straight line basis on all classes of property, plant and equipment other than freehold land. The estimated
useful life of buildings is 40 years; plant and equipment is between 3 and 20 years.
The assets’ residual values, useful lives and amortisation methods are reviewed, and adjusted if appropriate, at each financial year end.
An item of property, plant and equipment is de-recognised upon disposal or when no further future economic benefits are expected from
its use or disposal.
Impairment of non-financial assets other than goodwill
We have performed an impairment assessment based on the policy below. No material impairment was noted.
At each reporting date, the Group assesses whether there is any indication that an asset may be impaired. Where an indicator
of impairment exists or when annual impairment testing for an asset is required, the Group makes a formal estimate of the
recoverable amount. An asset’s recoverable amount is the higher of its fair value less costs to sell and its value in use and is
determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from
other assets or groups of assets and the asset’s value in use cannot be estimated to be close to its fair value. In such cases the
asset is tested for impairment as part of the cash-generating unit to which it belongs. When the carrying amount of an asset
or cash-generating unit exceeds its recoverable amount the asset or cash-generating unit is considered impaired and is written
down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value.
An assessment is also made at each reporting date as to whether there is any indication that previously recognised impairment losses
may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised
impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since
the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount.
That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment
loss been recognised for the asset in prior years. Such reversal is recognised in the income statement.
Monadelphous Group Limited | Financial Report | 79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
10. INTANGIBLE ASSETS AND GOODWILL
Year ended 30 June 2019
At 1 July 2018
At 30 June 2019
Year ended 30 June 2018
At 1 July 2017
On business combination
Amortisation
At 30 June 2018
Intangible Assets
$’000
Goodwill
$’000
Total
$’000
-
-
625
-
(625)
-
3,120
3,120
2,720
400
-
3,120
3,120
3,120
3,345
400
(625)
3,120
Description of the Group’s intangible assets
Intangible assets relate to the fair value of contracts acquired on acquisition of Arc West Group Pty Ltd. Intangible assets have been
assessed as having a finite life and are amortised using the straight line method over a period of 19 months.
Impairment testing of the Group’s intangible assets and goodwill
Goodwill acquired through business combinations has been allocated to cash generating units (“CGU”) for impairment testing purposes.
The CGUs are the entity Monadelphous Electrical & Instrumentation Pty Ltd, the Hunter Valley business unit, the entity Monadelphous
Energy Services Pty Ltd, the entity Arc West Group Pty Ltd and the entity R.I.G. Installations (Newcastle) Pty Ltd. None of these CGUs
are material to the Group. The recoverable amount of each CGU has been determined based on a value in use calculation using cash
flow projections based on financial budgets approved by management covering a five year period and applying a discount rate to the
cash flow projections in the range of 12% to 15%. No reasonably possible changes in key assumptions would result in the carrying
amount of the individual CGUs exceeding their recoverable amount.
Recognition and measurement
Goodwill
Goodwill acquired in a business combination is initially measured at cost being the excess of the consideration over the fair value of
the Group’s identifiable assets acquired and liabilities assumed. Following initial recognition, goodwill is measured at cost less any
accumulated impairment losses.
Goodwill is reviewed for impairment annually or more frequently if events or changes in circumstances indicate that the carrying value
may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination, is, from the acquisition date,
allocated to each of the Group’s CGUs or groups of CGUs that are expected to benefit from the synergies of the combination, irrespective
of whether other assets or liabilities of the Group are assigned to those units or groups of units.
Impairment is determined by assessing the recoverable amount of the CGU (group of CGUs) to which the goodwill relates. If the
recoverable amount of the CGU (group of CGUs) is less than the carrying amount, an impairment loss is recognised. Impairment losses
recognised for goodwill are not subsequently reversed.
Intangible assets
The cost of an intangible asset acquired in a business combination is its fair value as at the date of acquisition. Following initial
recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses.
The useful lives of intangible assets are assessed to be finite. The intangible assets are amortised over their useful life. Intangible assets
are tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the
amortisation method for the intangible assets is reviewed at least each financial year end. Changes in the expected useful life or the
expected pattern of consumption of future economic benefits embodied in the assets are accounted for prospectively by changing the
amortisation period or method, as appropriate, which is a change in accounting estimate. The amortisation expense on intangible assets
is recognised in the income statement in the expense category consistent with the function of the intangible asset.
80 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
11. INTEREST IN JOINT VENTURES
Mondium Pty Ltd
On 21 October 2016, an Australian joint venture company, Mondium Pty Ltd was formed between Monadelphous and Lycopodium
Ltd. The Group has a 60% interest in the joint venture. The principal activity of Mondium is to deliver engineering, procurement and
construction services in the minerals processing sector. The Group’s interest in Mondium Pty Ltd is not material.
Zenviron Pty Ltd
On 26 July 2016, a joint venture company, Zenviron Pty Ltd was formed between Monadelphous and ZEM Energy Investments Pty Ltd.
The Group has a 55% ownership interest in the joint venture and a 50% interest in the voting rights. The principal activity of Zenviron
is to deliver multi-disciplinary construction services in the renewable energy market in Australia and New Zealand.
The Group considers that it has joint control with its respective joint venture partner over Mondium Pty Ltd and Zenviron Pty Ltd as
relevant decisions at a Board and Shareholder level require unanimous agreement.
Zenviron Pty Ltd results, assets and liabilities are as follows:
Summarised statement of financial position
Cash and cash equivalents
Current assets
Non-current assets
Current liabilities
Current financial liabilities
Non-current liabilities
Non-current financial liabilities
Equity
Group’s share of Zenviron Pty Ltd net assets
Summarised statement of financial performance
Revenue from contracts with customers
Cost of sales
Profit before tax
Income tax expense
Profit after tax
Profit and total comprehensive income for the year
Depreciation expense
Interest income
Interest expense
Group’s share of profit for the year
2019
$’000
2018
$’000
23,272
73,127
4,574
17,087
35,987
1,413
(61,486)
(26,158)
(735)
(3,824)
(2,037)
12,392
6,815
220,618
(197,171)
16,326
(4,915)
11,411
11,411
(770)
362
(23)
6,276
-
(10,261)
-
981
540
89,210
(80,105)
1,203
(365)
838
838
(354)
145
(201)
461
Commitments and contingent liabilities relating to Joint Ventures
The Group’s share of insurance bond guarantees issued by Joint Ventures at 30 June 2019 was $9,782,482 (2018: $9,823,596).
Joint ventures had no capital commitments at 30 June 2019 (2018: $nil).
Recognition and measurement
A joint venture is a type of arrangement whereby the parties that have joint control of the arrangement have the rights to the net assets
of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions
about the relevant activities require unanimous consent of the parties sharing control.
The considerations made in determining significant influence or joint control are similar to those necessary to determine control
over subsidiaries.
The Group’s investments in its joint ventures are accounted for using the equity method. Under the equity method, the investment is
initially recognised at cost. The carrying value of the investment is adjusted to recognise changes in the Group’s share of net assets of
the joint venture since the acquisition date. The income statement reflects the Group’s share of the results of the joint venture.
Monadelphous Group Limited | Financial Report | 81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
12. OTHER NON-CURRENT ASSETS
Other non-current assets
Other non-current assets consist of investments as follows:
2019
$’000
2018
$’000
2,921
2,806
Ordinary shares at fair value in Lycopodium Limited (ASX Code: LYL). The investment is classified as a financial asset at fair value
through other comprehensive income (30 June 2018: available-for-sale investment). Refer note 31. Fair value is calculated using
quoted prices in active markets.
13. TRADE AND OTHER PAYABLES
CURRENT
Trade payables
Contract liabilities
Advances on construction work in progress
Sundry creditors and accruals
2019
$’000
2018
$’000
113,661
33,579
-
37,101
184,341
68,946
-
65,599
29,463
164,008
Significant changes to contract liabilities
During the year an amount of $24,782,000 of contract liabilities recognised at the date of initial application of AASB 15 was
recognised as revenue. At 30 June 2019 advance payments of $33,579,000 have been received from customers. Contract liabilities
fluctuate based on progress of completion of contracts.
Recognition and measurement
Trade and other payables
Trade and other payables are carried at amortised cost and are not discounted due to their short term nature. They represent liabilities
for goods and services provided to the Group prior to the end of the financial year that are unpaid and arise when the Group becomes
obliged to make future payments in respect of the purchase of these goods and services. The amounts are unsecured, non-interest
bearing and are usually paid within 30 to 45 days of recognition.
Sundry creditors and accruals are non-interest bearing and have terms of 7 to 30 days.
Contract liability – effective 1 July 2018
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an
amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the
customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities
are recognised as revenue when the Group performs under the contract.
82 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
14. INTEREST BEARING LOANS AND BORROWINGS
CURRENT
Hire purchase liability – secured
Loan – secured
NON-CURRENT
Hire purchase liability – secured
Loan – secured
Terms and conditions
2019
$’000
2018
$’000
9,668
1,200
10,868
25,261
2,100
27,361
7,944
-
7,944
13,027
-
13,027
Hire purchase agreements have an average term of three years. The average discount rate implicit in the hire purchase liability is
3.35% (2018: 4.09%). The hire purchase liability is secured by a charge over the hire purchase assets.
Defaults and breaches
During the current and prior year, there were no defaults or breaches on any of the loans.
Recognition and measurement
Interest bearing loans and borrowings
Interest bearing loans and borrowings are initially recognised at fair value of the consideration received less directly attributable
transaction costs. After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using
the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
twelve months after the reporting date.
Gains or losses are recognised in the income statement when the liabilities are derecognised.
Leases
The determination of whether an arrangement is or contains a lease is based on the substance of the arrangement and requires an
assessment of whether the fulfilment of the arrangement is dependent on the use of a specific asset or assets and the arrangement
conveys a right to use the asset.
Leases are classified at their inception as either operating or finance leases based on the economic substance of the agreement so
as to reflect the risks and benefits incidental to ownership.
Finance leases
Leases which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item
are classified as finance leases. The financed asset is stated at the lower of its fair value and the present value of the minimum
lease payments at inception of the lease, less accumulated depreciation and impairment losses. An interest bearing liability of
equal value is also recognised at inception. Minimum lease payments are apportioned between the finance charge and the
reduction of the lease liability.
The finance charge is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining
balance of the liability. Finance charges are recognised as an expense in the income statement.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
Monadelphous Group Limited | Financial Report | 83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OPERATING ASSETS AND LIABILITIES
FOR THE YEAR ENDED 30 JUNE 2019
15. PROVISIONS
CURRENT
Employee benefits
Workers’ compensation
NON-CURRENT
Employee benefits – long service leave
Movements in provisions
Workers compensation
Carrying amount at the beginning of the year
Additional provision
Amounts utilised during the year
Carrying amount at the end of the financial year
Recognition and measurement
2019
$’000
2018
$’000
44,690
18,363
63,053
67,837
26,269
94,106
4,542
5,259
26,269
2,140
(10,046)
18,363
Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that
an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the
amount of the obligation.
When the Group expects some or all of a provision to be reimbursed, for example under an insurance contract, the reimbursement is
recognised as a separate asset but only when the reimbursement is virtually certain. The expense relating to any provision is presented
in the income statement net of any reimbursement.
Provisions are measured at the present value of management’s best estimate of the expenditure to settle the present obligation at the
reporting date using a discounted cash flow methodology. The risks specific to the provision are factored into the cash flows and as such
a risk-free government bond rate relevant to the expected life of the provision is used as a discount rate. The increase in the provision
resulting from the passage of time is recognised as a finance cost.
Employee benefits
Employee benefits includes liabilities for wages and salaries, rostered days off, vesting sick leave, project incentives and project
redundancies. It is customary within the engineering and construction industry for incentive payments and redundancies to be paid to
employees at the completion of a project. The provision has been created to cover the expected costs associated with these statutory
and project employee benefits.
Liabilities for short term benefits expected to be wholly settled within twelve months of the reporting date are recognised in respect
of employees’ services up to the reporting date. They are measured at the amounts expected to be paid when the liability is settled.
Expenses for non-vesting sick leave are recognised when the leave is taken and are measured at the rates paid or payable.
The liability for long term benefits is recognised and measured as the present value of the expected future payments to be made in
respect of services provided by employees up to the reporting date using the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on high quality corporate bonds, which have terms to maturity approximating
the estimated future cash outflows.
Workers’ compensation
It is customary for all entities within the engineering and construction industry to be covered by workers’ compensation insurance.
Payments under these policies are calculated differently depending on which state of Australia the entity is operating in. Premiums are
generally calculated based on actual wages paid and claims experience. Wages are estimated at the beginning of each reporting period.
Final payments are made when each policy is closed out based on the difference between actual wages and the original estimated
amount. The amount of each payment varies depending on the number of incidents recorded during each period and the severity
thereof. The policies are closed out within a five years period through negotiation with the relevant insurance company. The provision
has been created to cover the expected costs associated with closing out each insurance policy and is adjusted accordingly based on
the actual payroll incurred and the severity of incidents that have occurred during each period.
84 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
16. CAPITAL MANAGEMENT
Capital is managed by the Group’s Chief Financial Officer in conjunction with the Group’s Finance and Accounting department.
Management continually monitor the Group’s net cash/debt position and the gearing levels to ensure efficiency and compliance with the
Group’s banking facility covenants, including the gearing ratio, operating leverage ratio and fixed charge coverage ratio. At 30 June 2019,
the Group is in a net cash position of $125,813,000 (2018: $187,802,000) and has a debt to equity ratio of 9.7% (2018: 5.3%) which
is within the Group’s net cash and debt to equity target levels.
During the year ended 30 June 2019, management paid dividends of $53,673,000. The policy is to payout dividends of 80% to 100% of
annual net profit after tax, subject to the working capital requirements of the business, potential investment opportunities and business and
economic conditions generally.
The capital of the Company is considered to be contributed equity.
2019
$’000
2018
$’000
17. DIVIDENDS PAID AND PROPOSED
Declared and paid during the year
Current year interim
Interim franked dividend for 2019 (25 cents per share) (2018: 30 cents per share)
23,561
28,199
Previous year final
Final franked dividend for 2018 (32 cents per share) (2017: 30 cents per share)
30,112
28,174
Unrecognised amounts
Current year final
Final franked dividend for 2019 (23 cents per share) (2018: 32 cents per share)
21,688
30,115
Franking credit balance
Franking credits available for future reporting years at 30% adjusted for
franking credits that will arise from the payment of income tax payable as
at the end of the financial year
Impact on the franking account of dividends proposed or declared before
the financial report was authorised for issue but not recognised as a
distribution to equity holders during the period
58,351
53,356
(9,295)
49,056
(12,906)
40,450
Tax rates
The tax rate at which paid dividends have been franked is 30% (2018: 30%). Dividends payable will be franked at the rate of 30%
(2018: 30%).
Recognition and measurement
A provision for dividends is not recognised as a liability unless the dividends are declared on or before the reporting date.
Monadelphous Group Limited | Financial Report | 85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
18. CONTRIBUTED EQUITY
Ordinary shares – Issued and fully paid
Reserved shares
Ordinary shares
2019
$’000
2018
$’000
129,992
126,972
(1,269)
(1,269)
128,723
125,703
Ordinary shares have the right to receive dividends as declared and, in the event of the winding up of the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held.
Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company.
2019
2018
Number of Shares
$’000
Number of Shares
$’000
Beginning of the financial year
94,108,311
126,972
93,928,264
Dividend reinvestment plan
End of the financial year
186,176
3,020
180,047
94,294,487
129,992
94,108,311
124,234
2,738
126,972
During the year ended 30 June 2019, no employees exercised options to acquire fully paid ordinary shares.
Reserved shares
Beginning of the financial year
Acquisition of reserved shares
End of the financial year
Recognition and measurement
2019
2018
Number of Shares
$’000
Number of Shares
$’000
85,500
6,875
92,375
(1,269)
85,500
(1,269)
-
(1,269)
-
-
85,500
(1,269)
Contributed equity
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are recognised
directly in equity as a deduction, net of tax, from the proceeds.
Reserved shares
The Group’s own equity instruments, which are reacquired for later use in employee share-based payment arrangements (reserved
shares), are deducted from equity. No gain or loss is recognised in the income statement on the purchase, sale, issue or cancellation
of the Group’s own equity instruments.
86 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
CAPITAL STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
19. RESERVES AND RETAINED EARNINGS
Foreign currency translation reserve
Share-based payment reserve
Fair value reserve for financial assets (2018: Available-for-sale reserve)
Retained earnings
Movements in retained earnings
Balance at the beginning of the year
Opening balance adjustment of AASB 15
Opening balance adjustment of AASB 9
Balance at the beginning of the year – restated
Net profit attributable to equity holders of the parent
Total available for appropriation
Dividends paid
Balance at the end of the year
Movements in reserves
2019
$’000
2018
$’000
84
32,721
902
33,707
231,006
(191)
29,662
821
30,292
238,486
238,486
223,380
(4,127)
(245)
234,114
50,565
284,679
(53,673)
231,006
-
-
223,380
71,479
294,859
(56,373)
238,486
Total
$’000
Foreign Currency
Translation Reserve
$’000
Share-Based
Payment Reserve
$’000
Fair Value
Reserve for
Financial Assets
$’000
At 1 July 2017
Foreign currency translation
Share-based payment
Net fair value gain of available-for-sale
financial assets
At 30 June 2018
Foreign currency translation
Share-based payment
Adjustment to deferred tax asset recognised
on employee share trust
Net fair value gain of financial assets
719
(910)
-
-
(191)
275
-
-
-
30,142
-
(480)
-
29,662
-
2,953
106
-
At 30 June 2019
84
32,721
Nature and purpose of reserves
187
31,048
-
-
634
821
-
-
-
81
902
(910)
(480)
634
30,292
275
2,953
106
81
33,707
Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising from translation of the financial statements
of foreign subsidiaries.
Share-based payment reserve
The share-based payment reserve is used to record the value of equity benefits provided to employees and directors as part of their
remuneration. Refer to note 26 for further details of these plans.
Fair value reserve for financial assets (previously: Available-for-sale reserve)
The fair value reserve for financial assets (2018: Available-for-sale reserve) is used to record the movement in fair value of financial assets.
Monadelphous Group Limited | Financial Report | 87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
20. SUBSIDIARIES
The consolidated financial statements include the financial statements of Monadelphous Group Limited and subsidiaries:
Name
Parent:
Monadelphous Group Limited
Controlled entities of Monadelphous Group Limited:
Monadelphous Engineering Associates Pty Ltd#
Monadelphous Properties Pty Ltd#
Monadelphous Engineering Pty Ltd#
Genco Pty Ltd#
Monadelphous Workforce Pty Ltd#
Monadelphous Electrical & Instrumentation Pty Ltd#
Monadelphous KT Pty Ltd#
Monadelphous Energy Services Pty Ltd#
M Workforce Pty Ltd#
M Maintenance Services Pty Ltd#
M&ISS Pty Ltd
SinoStruct Pty Ltd
Monadelphous Group Limited Employee Share Trust
Monadelphous Holdings Pty Ltd
MGJV Pty Ltd
Evo Access Pty Ltd
Monadelphous Investments Pty Ltd
MWOG Pty Ltd
MOAG Pty Ltd
Monadelphous International Holdings Pty Ltd
Arc West Group Pty Ltd
R.I.G. Installations (Newcastle) Pty Ltd
RE&M Services Pty Ltd
Pilbara Rail Services Pty Ltd
EC Projects Pty Ltd*
Monadelphous PNG Ltd
Moway International Limited
Moway AustAsia Steel Structures Trading (Beijing)
Company Limited
Monadelphous Singapore Pte Ltd
Monadelphous Mongolia LLC
Monadelphous Inc.
Monadelphous Marcellus LLC
MKT Pipelines Limited
Monadelphous Engineering NZ Pty Ltd
Monadelphous Sdn Bhd
Percentage Held by
Consolidated Entity
Parent Entity Investment
Country of
Incorporation
2019
%
2018
%
2019
$’000
2018
$’000
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Papua New Guinea
Hong Kong
China
Singapore
Mongolia
USA
USA
Canada
New Zealand
Malaysia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70^
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
70^
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
26,132
1,941
4,066
342
370
5,343
15,729
4,434
-
-
-
125
-
-
-
-
-
-
-
-
5,440
1,488
-
-
-
-
515
-
304
-
1,806
-
-
8,587
-
26,132
1,941
4,066
342
370
5,343
15,729
4,434
-
-
-
125
-
-
-
-
-
-
-
-
5,440
1,488
-
-
-
-
443
-
144
-
1,806
-
-
-
-
76,622
67,803
# Controlled entities subject to the Class Order (Refer to note 30)
*
^ The Group considers that it controls MGJV Pty Ltd as it has a casting vote at Board Meetings.
Incorporated during the year
Ultimate parent
Monadelphous Group Limited is the ultimate holding company.
Material partly-owned subsidiaries
There were no subsidiaries that have a material non-controlling interest during the year.
88 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
GROUP STRUCTURE
FOR THE YEAR ENDED 30 JUNE 2019
21. INTEREST IN JOINT OPERATIONS
Joint operations interests
The Group’s interests in joint operations are as follows:
Joint Arrangement
Principal Activity
Group Interest
Principal Place
of Business
2019
%
2018
%
Monadelphous Worley JV PNG
Engineering, Procurement and Construction
& Maintenance Support Work in PNG
PNG
Monadelphous Worley JV
Engineering, Procurement and Construction
& Maintenance Support Work
Brisbane, QLD
China Petroleum Engineering
& Construction (Australia)
Pty Ltd and Monadelphous
Engineering Pty Ltd Joint Venture
Maintenance Support Work
Brisbane, QLD
65
65
50
65
65
-
Commitments and contingent liabilities relating to joint operations
There were no capital commitments or contingent liabilities relating to the joint operations at 30 June 2019 (2018: $nil).
Impairment
There were no assets employed in the joint operations during the year ended 30 June 2019 (2018: $nil).
Recognition and Measurement
Joint arrangements are arrangements of which two or more parties have joint control. Joint control is the contractual agreed sharing
of control of the arrangement which exists only when decisions about the relevant activities require unanimous consent of the parties
sharing control. Joint arrangements are classified as either a joint operation or joint venture, based on the rights and obligations arising
from the contractual obligations between the parties to the arrangement.
To the extent the joint arrangement provides the Group with rights to the individual assets and obligations arising from the joint
arrangement, the arrangement is classified as a joint operation and as such, the Group recognises its:
• Assets, including its share of any assets held jointly;
• Liabilities, including its share of any liabilities incurred jointly;
• Revenue from the sale of its share of the output arising from the joint operation; and
• Expenses, including its share of any expenses incurred jointly.
To the extent the joint arrangement provides the Group with rights to the net assets of the arrangement, the investment is classified as
a joint venture and accounted for using the equity method. Under the equity method, the cost of the investment is adjusted by the post-
acquisition changes in the Group’s share of the net assets of the venture.
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise receivables, payables, loans, finance leases and hire purchase contracts, cash
and short-term deposits.
The Group is exposed to financial risks which arise directly from its operations. The Group has policies and measures in place to
manage financial risks encountered by the business.
Primary responsibility for the identification of financial risks rests with the Board. The Board determines policies for the management
of financial risks. It is the responsibility of the Chief Financial Officer and senior management to implement the policies set by the
Board and for the constant day to day management of the Group’s financial risks. The Board reviews these policies on a regular basis
to ensure that they continue to address the risks faced by the Group.
The main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, credit risk and liquidity risk.
The Group’s policy to minimise risk from fluctuations in interest rates is to utilise fixed interest rates in its loans, finance leases and hire
purchase contracts. Cash and short term deposits are exposed to floating interest rate risks. The Group manages its foreign currency
risk arising from significant supplier contracts in foreign currencies by holding foreign currency or taking out forward exchange contracts.
Analysis is performed on a customer’s credit rating prior to signing contracts and analysis is performed regularly of credit exposures and
aged debt to manage credit and liquidity risk.
Monadelphous Group Limited | Financial Report | 89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2019
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
The policies in place for managing the financial risks encountered by the Group are summarised below.
Risk exposures and responses
Interest rate risk
The Group’s exposure to variable interest rates is as follows:
Financial assets/liabilities
Cash and cash equivalents
Loan - secured
Net exposure
Notes
5
14
2019
$’000
2018
$’000
164,042
208,773
(3,300)
-
160,742
208,773
The Group utilises a number of financial institutions to obtain the best interest rate possible and to manage its risk. The Group does
not enter into interest rate hedges.
At 30 June 2019, reasonably possible movements in variable interest rates, based on a review of historical movements and forward
rate curves for forward rates would not have had a material impact on the Group.
Foreign currency risk
As a result of operations in the USA, Papua New Guinea, China, Mongolia and New Zealand the Group’s statement of financial position
can be affected by movements in the US$/A$, PGK/A$, RMB/A$, MNT/A$ and NZ$/A$ exchange rates.
The Group also has transactional currency exposures. Such exposure arises from sales or purchases by an operating entity in currencies
other than the functional currency. Where possible, Monadelphous does not take on foreign exchange risk. At 30 June 2019, the Group
had no forward contracts.
The Group also mitigates its exposure to foreign currency risk by minimising excess foreign currency balances in overseas jurisdictions
not required for working capital.
At 30 June 2019, the Group had the following exposure to foreign currency:
PGK
AUD $’000
USD
AUD $’000
Euro
AUD $’000
Year ended 30 June 2019
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Net Exposure
Year ended 30 June 2018
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Net Exposure
90 | Monadelphous Group Limited | Annual Report 2019
5,835
5,826
(1,250)
10,411
6,041
3,545
(2,017)
7,569
32,974
15,771
(1,615)
47,130
15,290
9,272
(3,784)
20,778
229
-
-
229
5,176
-
-
5,176
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2019
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk exposures and responses (continued)
Foreign currency risk (continued)
At 30 June 2019, reasonably possible movements in PGK and Euro foreign exchange rates, based on a review of historical movements,
would not have had a material impact on the Group.
At 30 June 2019, if the USD foreign exchange rates had moved, as illustrated in the table below, with all other variables held constant,
post tax profit and equity would have been affected as follows:
Judgements of reasonably possible movements
relating to financial assets and liabilities
denominated in USD:
+5% (2018: +5%)
-5% (2018: -5%)
Post Tax Profit
Higher/(Lower)
Other Comprehensive Income
Higher/(Lower)
2019
$’000
(1,650)
1,650
2018
$’000
(727)
727
2019
$’000
-
-
2018
$’000
-
-
The reasonably possible movements have been based on review of historical movements.
Credit risk
Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to
a financial loss. The Group is exposed to credit risk from its operating activities (primarily trade receivables) and from its financing
activities, including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.
The Group’s maximum exposure to credit risk is its cash, trade and other receivables and contract assets representing $516,263,000
at 30 June 2019 (2018: $497,144,000).
Following the adoption of AASB 9, the Group considers the probability of default upon initial recognition of a financial asset and
whether there has been a significant increase in credit risk on an ongoing basis throughout the reporting period.
Except for trade receivables, contract assets and other short-term receivables (see below), expected credit losses (ECL’s) are recognised
in two stages. For credit exposures for which there has not been a significant increase in credit risk since initial recognition, ECL’s are
provided for credit losses that result from default events that are possible within the next 12 months (a 12-month ECL). For those credit
exposures for which there has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit
losses expected over the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
To assess whether there is a significant increase in credit risk the Group compares the risk of a default occurring on the asset as
at the reporting date with the risk of default as at the date of initial recognition. In making this assessment, the Group considers
information that is reasonable and supportable, including historical experience and forward-looking information. Forward-looking
information considered includes consideration of external sources of economic information. In particular, the Group takes into
account the counterparties external credit rating (as far as available), actual or expected significant changes in the operating
results of the counterparty and macroeconomic indicators when assessing significant movements in credit risk.
In the prior period, impairment losses were recognised when there was objective evidence of impairment.
Trade receivables and contract assets
The Group trades with recognised, creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit
terms are subject to credit verification procedures. Publicly available credit information from recognised providers is utilised for this
purpose where available.
In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.
The Group minimises concentrations of credit risk in relation to accounts receivable and contract assets by undertaking transactions
with a number of customers within the resources, energy and infrastructure industry sector. There are multiple contracts with our
significant customers, across a number of their subsidiaries, divisions within those subsidiaries and locations.
For transactions that are not denominated in the functional currency of the relevant operating unit, the Group does not offer credit terms
without the specific approval of the Chairman, Managing Director or Chief Financial Officer.
Since the Group trades with recognised third parties, there is no requirement for collateral.
Monadelphous Group Limited | Financial Report | 91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2019
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk exposures and responses (continued)
Credit risk (continued)
With effect from 1 July 2018, the Group applies a simplified approach in calculating ECLs for trade receivables and contract assets.
Therefore, the Group does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each
reporting date. An impairment analysis is performed at each reporting date using a provision matrix to measure expected credit losses.
The provision rates are based on days past due ageing for groupings of various customer segments with similar loss patterns.
The calculation reflects the probability-weighted outcome, the time value of money and reasonable and supportable information that is
available at the reporting date about past events, current conditions and forecasts of future economic conditions.
A receivable is considered to be credit-impaired when one or more events that have a detrimental impact on the estimated future cash
flows have occurred. Evidence that a receivable is credit-impaired includes observable data about significant financial difficulty of the
debtor or a breach of contract, such as a default or past due event.
Set out below is the information about the credit risk exposure at 30 June 2019 on the Group’s trade receivables and contract assets,
for which lifetime expected credit losses are recognised, using a provision matrix:
Trade receivables
Days past due
Contract
assets
Current
<31
days
31-60
days
61-90
days
>91
days
Total
30 June 2019
Expected credit loss rate (%)
0.93
0.78
0.78
1.32
2.01
13.56
Total estimated gross carrying
amount at default ($’000)
29,661
202,152
26,770
Expected credit loss ($’000)
275
1,570
209
7,325
97
4,023
12,366
252,636
81
1,677
3,634
At 30 June 2018, the ageing of trade receivables, past due but not considered impaired was as follows:
1-30 Days
31-60 Days
61+ Days
2018
$’000
33,706
9,054
19,332
62,092
Other balances within trade and other receivables at 30 June 2019 did not contain impaired assets and were not past due.
It was expected that these other balances would be received when due.
Financial instruments and cash deposits
With respect to credit risk arising from the other financial assets of the Group, which comprises cash and cash equivalents, the
Group’s exposure to credit risk arises from default of the counter party, with a maximum exposure equal to the carrying amount of
these instruments. The Group minimises its exposure to credit risk for cash and cash equivalents, by investing funds with counter
parties rated A+ or higher by Standard & Poor’s where possible. Term deposits typically have an original maturity of three months
or less and other bank deposits are on call. These financial assets are considered to have low credit risk.
Write off policy
The Group writes off a financial asset when there is information indicating that the counterparty is in severe financial difficulty and
there is no realistic prospect of recovery, e.g. when the counterparty has been placed under liquidation or entered into bankruptcy
proceedings. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures,
taking into account legal advice where appropriate. Any recoveries made are recognised in profit or loss.
92 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2019
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk exposures and responses (continued)
Liquidity risk
Financing facilities available
At balance date the following financing facilities had been negotiated and
were available
Total facilities:
- Bank guarantee and performance bonds
- Revolving credit
Facilities used at balance date:
- Bank guarantee and performance bonds
- Revolving credit
Facilities unused at balance date:
- Bank guarantee and performance bonds
- Revolving credit
2019
$’000
2018
$’000
490,000
90,300
580,300
209,925
38,229
248,154
280,075
52,071
332,146
460,000
64,559
524,559
181,759
20,971
202,730
278,241
43,588
321,829
Nature of bank guarantees and performance bonds
The contractual term of the bank guarantees and performance bonds match the underlying obligation to which it relates.
Nature of revolving credit
The revolving credit includes hire purchase/leasing facilities. Refer to note 14 for terms and conditions.
The Group’s objective is to manage the liquidity of the business by monitoring project cash flows and through the use of financing
facilities. The Group currently utilises financing facilities in the form of hire purchase liabilities and secured loans. The liquidity of the
group is managed by the Group’s Finance and Accounting department.
The table below reflects all contractually fixed pay-offs, repayments and interest resulting from financial liabilities as of 30 June 2019.
Monadelphous Group Limited | Financial Report | 93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
FINANCIAL RISK MANAGEMENT
FOR THE YEAR ENDED 30 JUNE 2019
22. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES (continued)
Risk exposures and responses (continued)
Liquidity risk (continued)
Maturity analysis of financial liabilities:
6 months
or less
$’000
6 months
to 1 year
$’000
1 year to
5 years
$’000
Total
Contractual
Cash Flows
$’000
Total
Carrying
Amount
$’000
184,341
6,053
654
191,048
164,008
3,920
167,928
-
4,738
644
5,382
-
4,705
4,705
-
184,341
184,341
26,917
2,172
29,089
-
14,269
14,269
37,708
3,470
34,929
3,300
225,519
222,570
164,008
22,894
186,902
164,008
20,971
184,979
Year ended 30 June 2019
Financial liabilities
Trade and other payables
Hire purchase liability
Bank Loans
Net maturity
Year ended 30 June 2018
Financial liabilities
Trade and other payables
Hire purchase liability
Net maturity
Net fair values of financial assets and liabilities
The carrying amounts and estimated fair values of financial assets and financial liabilities at balance date are materially the same.
Interest bearing liabilities with fixed interest rates: The fair value includes the value of contracted cash flows, discounted at market rates.
Cash and cash equivalent: The carrying amount approximates fair value because of their short-term maturity.
Receivables and payables: The carrying amount approximates fair value due to short term maturity.
Listed equity investments measured at fair value through other comprehensive income (2018 – Available-for-sale financial assets):
The carrying amount is equal to the fair value calculated using quoted prices in active markets (level 1 – see below).
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
Level 1: The fair value is calculated using quoted prices in active markets.
Level 2: The fair value is estimated using inputs other than quoted prices included in Level 1 that are observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices).
Level 3: The fair value is estimated using inputs for the asset or liability that are not based on observable market data.
There were no material financial assets or liabilities measured at fair value at 30 June 2019 or 30 June 2018.
94 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
UNRECOGNISED ITEMS
FOR THE YEAR ENDED 30 JUNE 2019
Notes
2019
$’000
2018
$’000
23. COMMITMENTS AND CONTINGENCIES
Hire purchase commitments
Payable:
- Within one year
- Later than one year but not later than five years
Minimum lease payments
Less future finance charges
Present value of minimum lease payments
Current liability
Non-current liability
14
14
Hire purchase agreements have an average term of three years.
Operating lease commitments
Minimum lease payments
- Within one year
- Later than one year but not later than five years
- Later than five years
Aggregate lease expenditure contracted for at
balance date but not provided for
2019
Properites
$’000
2019
Other
$’000
9,465
23,695
19,616
52,776
190
188
-
378
10,791
26,917
37,708
(2,779)
34,929
9,668
25,261
34,929
2019
Total
$’000
9,655
23,883
19,616
8,625
14,269
22,894
(1,923)
20,971
7,944
13,027
20,971
2018
Total
$’000
13,692
33,744
-
53,154
47,436
Other operating leases includes motor vehicles. Properties include the Victoria Park office lease, the Brisbane office lease and other
rental properties. Other operating leases have an average lease term remaining of 16 months. Properties under operating leases have
an average lease term remaining of less than one year.
Capital commitments
The consolidated group has capital commitments of $4,355,277 at 30 June 2019 (2018: $9,618,122).
Guarantees
2019
$’000
2018
$’000
Guarantees given to various clients for satisfactory contract performance
209,925
181,759
Monadelphous Group Limited and all controlled entities marked # in note 20 have entered into a deed of cross guarantee.
Refer to note 30 for details.
Contingent Liabilities
During the period, Monadelphous received a claim for property damage and associated losses arising from a fire which occurred while
the Company was performing shutdown services for a customer. No legal proceedings have been commenced. Liability for the claim has
not yet been established and the Company intends to defend the matter. Monadelphous has not made any admission of liability, and is
working with its insurers to respond to the claim.
The Group is subject to various other actual and pending claims arising in the normal course of business. The Group has regular claims
reviews to assess the need for accounting recognition or disclosure. The Directors are of the opinion that there is no material exposure
to the Group arising from these various actual and pending claims.
Monadelphous Group Limited | Financial Report | 95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
UNRECOGNISED ITEMS
FOR THE YEAR ENDED 30 JUNE 2019
24. SUBSEQUENT EVENTS
Dividends declared
On 19 August 2019, the directors of Monadelphous Group Limited declared a final dividend on ordinary shares in respect of the
2019 financial year. The total amount of the dividend is $21,687,732 which represents a fully franked final dividend of 23 cents per
share. This dividend has not been provided for in the 30 June 2019 financial statements. The Monadelphous Group Limited Dividend
Reinvestment Plan will apply to the dividend.
Acquisition of iPipe Services assets
On 5 July 2019, Monadelphous Group Limited completed the purchase of assets of iPipe Services, a provider of technology solutions,
construction and maintenance services to the coal seam gas sector. Total consideration of the acquisition was approximately
$3,000,000. The acquisition was not material to the Group.
Other than the items noted above, no matters or circumstances have arisen since the end of the financial year which significantly
affected or may significantly affect the operations of the consolidated entity, the results of those operations, or the state of affairs of
the consolidated entity in subsequent financial years.
Notes
2019
$’000
2018
$’000
25. PARENT ENTITY INFORMATION
Information relating to Monadelphous Group Limited parent entity
Current assets
Total assets
Current liabilities
Total liabilities
Net assets
Contributed equity
Share-based payment reserve
Fair value reserve for financial asset at FVOCI (previously: Available-for-sale reserve)
Retained earnings
Total equity
Profit after tax
Total comprehensive income of the parent entity
Contingent liabilities
Guarantees
140,758
185,199
2,064,004
1,848,312
(1,842,800)
(1,643,210)
(1,870,677)
(1,656,557)
193,327
191,755
128,723
32,293
902
31,409
193,327
48,526
48,607
125,703
28,675
821
36,556
191,755
52,676
53,310
23
209,925
181,759
Guarantees entered into by the Group are via the parent entity. Details are contained in note 23.
Capital commitments
The parent entity has capital commitments of $nil at 30 June 2019 (2018: $nil).
96 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
26. SHARE BASED PAYMENT EXPENSE
During the year, 257,379 Performance Rights were granted by Monadelphous Group Limited under the Combined Reward Plan (“CR Plan”)
in respect of the 2018 award. The Performance Rights vest into shares in equal instalments, one, two and three years subsequent to award,
subject to the employee remaining in the employ of the company at those particular dates.
The fair value of each Performance Right issued during the period was estimated on the date of grant using a discounted cash
flow calculation. Specifically, the Monadelphous Group Limited share price has been discounted at the dividend yield in order to
account for the dividends that the rights holder forgoes over the life of the rights. A dividend yield of 3.96% to 4.44% has been
used in the calculation.
The weighted average fair value of Performance Rights granted in the period was $13.90. The weighted average remaining contractual
life for the Performance Rights outstanding at 30 June 2019 was 1 year.
The following table illustrates the number and weighted average exercise prices of and movements in options granted, exercised and
forfeited during the year.
Balance at the beginning of the year
Issued during the year
Forfeited during the year
Balance at the end of the year
Exercisable during the next year
2019
2018
Number of
Performance
Rights
-
257,379
(8,972)
248,407
82,771
Weighted Average
Exercise Price
$ Number of Options
Weighted Average
Exercise Price
$
-
-
-
-
-
30,000
-
(30,000)
-
-
17.05
-
17.05
-
-
Subsequent to 30 June 2019, the Board has approved the issue of additional Performance Rights relating to the 2018/19 financial
year, to certain employees to the value of approximately $4,000,000. The rights will be issued based on the dividend reinvestment
plan price for the 2019 final dividend to be determined in October 2019. It is estimated that approximately 220,000 Performance
Rights will be granted under the terms of the CR Plan for the year ended 30 June 2019.
The share-based payment expense relating to the Monadelphous Group Limited Combined Reward Plan for the year ended 30 June 2019
was $3,513,531 (2018: $nil) for the consolidated entity. $2,167,803 relates to Performance Rights issued in 2018. $1,345,728 relates to
Performance Rights to be awarded subsequent to 30 June 2019, calculated based on an estimate of the fair value using the 30 June 2019
share price. The Performance Rights were approved by the Board on 30 July 2019, except for those relating to the CEO which will be subject
to approval at the Annual General Meeting in November 2019.
For the year ended 30 June 2019, the Group has recognised $80,000 of share-based payment expense in the Income Statement
(2018: $800,000) relating to shares to be issued as part of the acquisition of Arc West Group Pty Ltd. $640,000
(2018: $1,280,000) was satisfied as a cash payment during the year.
Recognition and Measurement
The Group provides benefits to employees (including Key Management Personnel) of the Group in the form of share-based payments,
whereby employees render services in exchange for shares or rights over shares (equity-settled transactions). These benefits are
provided through the Monadelphous Group Limited Combined Reward Plan.
The cost of these equity-settled transactions with employees is measured by reference to the fair value of the equity instruments at the
date on which they are granted. The fair value is determined by an external valuer. In valuing equity-settled transactions, no account is
taken of any performance conditions, other than conditions linked to the price of the shares of Monadelphous Group Limited (market
conditions), if applicable. The cost of equity-settled transactions is recognised, together with a corresponding increase in equity, over
the period in which the performance and/or service conditions are fulfilled (the vesting period), ending on the date on which the
relevant employees become fully entitled to the award (the vesting date).
The cumulative expense recognised for equity settled transactions at each reporting date until vesting date reflects (i) the extent to which the
vesting period has expired and (ii) the number of awards that, in the opinion of the directors of the Group, will ultimately vest. This opinion is
formed based on the best available information at balance date. No adjustment is made for the likelihood of market performance conditions
being met as the effect of these conditions is included in the determination of fair value at grant date. The income statement charge or credit
for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
Until an award has vested, any amounts recorded are contingent and will be adjusted if more or fewer awards vest than were originally
anticipated to do so. Any award subject to market condition is considered to vest irrespective of whether or not that market condition is
fulfilled, provided that all other conditions are satisfied.
The dilutive effect, if any, of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share.
Monadelphous Group Limited | Financial Report | 97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
27. AUDITORS’ REMUNERATION
The auditor of Monadelphous Group Limited is Ernst & Young.
Amounts received or due and receivable by Ernst & Young Australia for:
- An audit or review of the financial report of the entity and any other
entity in the consolidated entity
- Other services in relation to the entity and any other entity in the
consolidated entity
- tax compliance
- assurance related
2019
$
2018
$
296,053
254,534
36,089
-
30,411
31,000
332,142
315,945
Ernst & Young has provided an auditor’s independence declaration to the Directors of Monadelphous Group Limited confirming that the
provision of the other services has not impaired their independence as auditors.
28. RELATED PARTY DISCLOSURES
Compensation of key management personnel
Short term benefits
Post-employment
Long term benefits
Share-based payments
Total compensation
Zenviron
2019
$
2018
$
3,952,777
4,088,037
146,296
71,081
696,245
141,888
114,159
-
4,866,399
4,344,084
The group had sales to the joint venture during the year totalling $12,954,834 (2018: $10,213,000).
Mondium
At 30 June 2019, an amount totalling $1,264,000 (2018: $1,864,000) had been loaned to Mondium Pty Ltd. The loan is included
in the statement of financial position within Investment in Joint Venture. Interest is payable on the loan at a rate of 3.25% per annum.
The group had sales to the joint venture during the year totalling $5,799,662 (2018: $1,266,335).
29. OPERATING SEGMENTS
Revenue is derived by the consolidated entity from the provision of engineering services to the resources, energy and infrastructure
industry sector. For the year ended 30 June 2019, the Engineering Construction division contributed revenue of $622.9 million (2018:
$949.9 million) and the Maintenance and Industrial Services division contributed revenue of $998.4 million (2018: $841.1 million).
Included in these amounts is $13.0 million (2018: $7.0 million) of inter-entity revenue and $131.0 million (2018: $49.1 million) of
revenue of joint ventures, which is eliminated on consolidation. The operating divisions are exposed to similar risks and rewards from
operations, and are only segmented to facilitate appropriate management structures.
98 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
29. OPERATING SEGMENTS (continued)
The directors believe that the aggregation of the operating divisions is appropriate for segment reporting purposes as they:
• have similar economic characteristics in that they have similar gross margins;
• perform similar services for the same industry sector;
• have similar operational business processes;
• provide a diversified range of similar engineering services to a large number of common clients;
• utilise a centralised pool of engineering assets and shared services in their service delivery models, and the services provided
to customers allow for the effective migration of employees between divisions; and
• operate predominately in one geographical area, namely Australia.
Accordingly all services divisions have been aggregated to form one segment.
The Group has a number of customers to which it provides services. The largest customer represented 19% (2018: 28%) of the Group’s
revenue. Two other customers individually contributed 17% and 12% of the Group’s revenue. There are multiple contracts with these
customers, across a number of their subsidiaries, divisions within those subsidiaries and locations.
Geographical Information
Revenue from external customers
Australia
New Zealand
Mongolia
Other overseas locations
2019
$’000
2018
$’000
1,308,515
1,607,987
29,484
80,622
58,648
51,473
16,173
59,248
1,477,269
1,734,881
30. DEED OF CROSS GUARANTEE
Pursuant to ASIC Corporations (Wholly-owned Companies) Instrument 2016/785, relief has been granted to these controlled entities
of Monadelphous Group Limited from the Corporations Act 2001 requirements for preparation, audit and publication of accounts.
As a condition of the Class Order, Monadelphous Group Limited and the controlled entities subject to the Class Order, entered into a
deed of indemnity on 9 June 2011, 1 June 2012, 9 June 2014 and 8 June 2016. The effect of the deed is that Monadelphous Group
Limited has guaranteed to pay any deficiency in the event of winding up of these controlled entities. The controlled entities have also
given a similar guarantee in the event that Monadelphous Group Limited is wound up.
The consolidated income statement and statement of financial position of the entities that are members of the ‘Deed’ are as follows:
Consolidated Income Statement and Comprehensive Income
Profit before income tax
Income tax expense
Net profit after tax for the period
Reconciliation of Retained Earnings
Retained earnings at the beginning of the period
Opening balance adjustment on application of AASB 9
Dividends paid
Net profit after tax for the period
Retained earnings at the end of the period
2019
$’000
2018
$’000
61,949
(23,251)
38,698
117,063
(31,422)
85,641
243,195
213,927
(245)
-
(53,673)
(56,373)
38,698
227,975
85,641
243,195
Monadelphous Group Limited | Financial Report | 99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
30. DEED OF CROSS GUARANTEE (continued)
Consolidated Statement of Financial Position
ASSETS
Current assets
Cash and cash equivalents
Trade and other receivables
Contract assets
Total current assets
Non-current assets
Investments in subsidiaries
Property, plant and equipment
Deferred tax assets
Intangible assets and goodwill
Other non-current assets
Total non-current assets
TOTAL ASSETS
LIABILITIES
Current liabilities
Trade and other payables
Interest bearing loans and borrowings
Income tax payable
Provisions
Total current liabilities
Non-current liabilities
Interest bearing loans and borrowings
Provisions
Total non-current liabilities
TOTAL LIABILITIES
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained earnings
TOTAL EQUITY
100 | Monadelphous Group Limited | Annual Report 2019
2019
$’000
2018
$’000
129,277
326,156
30,566
485,999
7,872
106,220
28,021
3,120
2,921
148,154
634,153
153,318
10,868
198
48,693
213,077
27,361
3,822
31,183
173,927
297,046
33,363
504,336
7,639
92,458
32,262
3,120
2,806
138,285
642,621
128,526
7,944
7,092
83,077
226,639
13,027
4,561
17,588
244,260
244,227
389,893
398,394
128,723
33,195
227,975
389,893
125,703
29,496
243,195
398,394
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS
Other accounting policies
Financial assets
Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, fair value through OCI, and fair value
through profit or loss.
With the exception of trade receivables, that do not have a significant financing component, the Group initially measures a financial
asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables
that do not contain a significant financing component are measured at the transaction price determined under AASB 15.
Financial assets at amortised cost
The Group measures financial assets at amortised cost where the objective is to hold financial assets in order to collect contractual cash
flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level.
Financial assets at amortised cost are subsequently measured using the effective interest (EIR) method and are subject to impairment.
Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.
The Group’s financial assets at amortised cost includes trade receivables.
Financial assets at fair value
For financial assets at fair value, gains and losses will either be reported in profit or loss or other comprehensive income. For investments
in equity instruments that are not held for trading, this will depend on whether the Group has made an irrevocable election at the time of
initial recognition to account for the equity instruments at fair value through OCI.
Gains and losses on financial assets designated at fair value through OCI are not recycled to profit or loss. Dividends are recognised as
other income in the statement of profit or loss when the right of payment has been established. Equity instruments designated at fair
value through OCI are not subject to impairment assessment.
Impairment of financial assets
The Group recognises an allowance for ECLs for trade receivables, contract assets and other debt financial assets not held at fair value
through profit or loss. ECLs are based on the difference between the contracted cash flows due in accordance with the contract and all
the cash flows the Group expects to receive, discounted at an approximation of the original effective interest rate.
For trade receivables and contract assets, the Group applies a simplified approach in calculating expected credit losses and recognises
a loss allowance based on lifetime expected credit losses at each reporting date. The Group has established a provision matrix that is
based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the economic environment.
Definition of default
The Group considers a financial asset to be in default when contractual payments are 90 days past due or when internal or external
information indicates that the Group is unlikely to receive the outstanding contractual amounts in full.
Write off policy
A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows.
Goods and services tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
• when the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the GST
is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• receivables and payables are stated with the amount of GST included.
The net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
statement of financial position.
Cash flows are included in the statement of cash flows on a gross basis and the GST component of cash flows arising from investing
and financing activities, which is recoverable from, or payable to, the taxation authority are classified as operating cash flows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Monadelphous Group Limited | Financial Report | 101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
New and amended Accounting Standards and Interpretations adopted during the year
Monadelphous Group Limited and its subsidiaries (‘the Group’) has adopted all new and amended Australian Standards and
Interpretations mandatory for reporting periods beginning on or before 1 July 2018.
The Group applies, for the first time, AASB 15 Revenue from Contracts with Customers (“AASB 15”) and AASB 9 Financial
Instruments (“AASB 9”) and the consequential amendments to other Accounting Standards. In accordance with elections available
under these new accounting standards (see below for further details), the new accounting policies are effective from 1 July 2018 and
comparative information continues to be prepared in line with the accounting policies as disclosed in the 30 June 2018 Financial
Report. The cumulative effect of initially applying the Standards has been recognised as an adjustment to the opening balance of
retained earnings.
Other revised Standards and Interpretations which apply from 1 July 2018 did not have any material effect on the financial position or
performance of the Group.
AASB 15 Revenue from contracts with customers
AASB 15 supersedes AASB 118 Revenue, AASB 111 Construction Contracts and related interpretations. The new standard establishes
a five-step model to account for revenue arising from contracts with its customers. Under AASB 15, revenue is recognised at an amount
that reflects the consideration to which the entity expects to be entitled in exchange for transferring goods or services to the customer.
The Group adopted AASB 15 using the modified retrospective method of adoption with the date of initial application being 1 July 2018.
Under this approach, the Group has elected to apply the standard only to contracts that are not completed contracts at the initial date
of application.
The cumulative impact of applying AASB 15 is recognised at the date of initial application as an adjustment to the opening balance of
retained earnings. The comparative information has not been restated and continues to be reported under AASB 118, AASB 111 and
related interpretations. On transition, the Group has also elected to use the contract modification practical expedient and applied the
expedient to all modifications that occurred before the date of initial application.
The nature of adjustments required on adoption of AASB 15 is as follows:
(a) Variable consideration
Under AASB 15, the transaction price reflects the Group’s expectations about the consideration to which it will be entitled to
receive from the customer. If the consideration promised in a contract includes a variable amount due to enforceable claims, the
Group is obliged to estimate the amount of consideration receivable. Before recognising any amount of variable consideration in
the transaction price, the Group is required to consider whether the amount of variable consideration is constrained. To include
variable consideration in the estimated transaction price under AASB 15, the Group has to conclude that it is highly probable that
a significant revenue reversal will not occur in future periods. Revenue was previously recognised to the extent it was probable that
future economic benefits would flow to the Group and was measured at the fair value of consideration received or receivable.
(b) Presentation of contract assets and liabilities
In accordance with AASB 15, when either party to the contract has performed, the Group is required to present a contract in
the Statement of Financial Position as a contract asset or contract liability depending on the relationship between the Group’s
performance and the customer’s payment. The Group is obliged to present any unconditional right to payment as a receivable.
A contract asset is considered to be unconditional if the right to receive payment is only conditional on the passage of time.
Under AASB 111, amounts due from customers were previously included in inventories as construction work in progress.
AASB 9 Financial Instruments
AASB 9 replaces parts of AASB 139 Financial Instruments: Recognition and Measurement and brings together three aspects of
accounting for financial instruments: classification and measurement; impairment; and hedge accounting.
The Group applied AASB 9 retrospectively with the initial application date being 1 July 2018. The Group has not restated comparative
information which continues to be reported under AASB 139. Differences arising from the adoption of AASB 9 has been recognised
directly in retained earnings.
The nature of the adjustments is described below:
(a) Classification and measurement
Under AASB 9 debt instruments are subsequently measured at fair value through profit or loss, amortised cost or fair value through
other comprehensive income (OCI). The classification is based on two criterion: the Group’s business model for managing the
assets; and whether the instruments’ contractual cash flows represent ‘solely payments of principal and interest’ on the principal
amount outstanding.
102 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
AASB 9 Financial Instruments (continued)
(a) Classification and measurement (continued)
The assessment of the Group’s business model was performed on the date of initial application, 1 July 2018. The assessment of
whether contractual cash flows on debt instruments are solely comprised of principal and interest was made based on the facts and
circumstances as at the initial recognition of the financial asset.
The classification and measurement requirements of AASB 9 did not have a significant impact on the Group. The Group continued
measuring at fair value all financial instruments previously held at fair value under AASB 139. The following are the changes in the
classification of the Group’s financial assets:
• Trade and other receivables, classified as Loans and Receivables as at 30 June 2018 are held to collect contractual cash flows
and give rise to cash flows representing solely payments of principal and interest. These are classified and measured as debt
instruments at amortised cost beginning 1 July 2018.
• The listed equity investment at 30 June 2018, previously classified as available-for-sale financial asset, is now classified as an
equity instrument designated at fair value through OCI (FVOCI) as this investment was not held for trading.
The changes in classifications have not resulted in any measurement difference on adoption of AASB 9. As a result of the change
in classification of the Group’s listed equity investment, the Available-for-sale reserve of $821,000 at 1 July 2018 has been
reclassified to the Fair value reserve for Financial Assets at FVOCI.
(b) Impairment
The adoption of AASB 9 has also changed the Group’s accounting for impairment losses for financial assets by replacing AASB
139’s incurred loss approach with a forward-looking expected credit loss (ECL) approach. AASB 9 requires the Group to recognise
an allowance for ECL for all debt instruments not held at fair value through profit and loss and contract assets. For trade receivables
and contract assets, the Group has applied the standard’s simplified approach and has calculated the expected credit loss based
on lifetime expected credit losses. The Group has established a provision matrix that is based on the Group’s historical credit loss
experience, adjusted for forward-looking factors specific to the debtors and economic environment.
As at 1 July 2018, the Group reviewed and assessed the existing financial assets for impairment using reasonable and supportable
information. In accordance with AASB 9, where the Group concluded that it would require undue cost and effort to determine the
credit risk of a financial asset on initial recognition, the Group recognised lifetime ECL.
With respect to the Group’s on demand and term deposits at 30 June 2018, no material adjustments were required on adoption
of the ECL approach. These balances were assessed as having low probability of default as they are either on demand or have
relatively short maturity dates and it is the Group’s policy that these balances are held with reputable financial institutions with high
credit ratings.
With respect to the Group’s trade receivables and contract assets, the Group trades with recognised, creditworthy third parties.
It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. Publicly
available credit information from recognised providers is utilised for this purpose where available. As a result, no material adjustment
was required on the adoption of the ECL approach.
The following table shows the changes to the classification of the Groups significant financial assets and liabilities on adoption of
AASB 9 at 1 July 2018.
Original Classification
under AASB 139
New Classification
under AASB 9
Original
Carrying Value
$’000
Carrying Value
under AASB 9
$’000
Cash and term deposits
Loans and receivables
Amortised cost
208,773
208,773
Equity investments
Available for sale
Designated at fair
value through OCI
2,806
2,806
Trade and other receivables
Loans and receivables
Amortised cost
Trade and other payables
Financial liabilities at
amortised cost
Amortised cost
288,371
164,008
288,190
164,008
Interest bearing loans and borrowings Financial liabilities at
amortised cost
Amortised cost
20,971
20,971
Monadelphous Group Limited | Financial Report | 103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
Impact on Application
The impact of the application of the new standards are analysed by financial statement line items below.
Notes
3
1,2,3
2
4
1,3,4
30 June 2018
$’000
AASB 9
Transition
Adjustments
$’000
AASB 15
Transition
Adjustments
$’000
Opening Balance
1 July 2018
$’000
288,371
-
47,200
35,304
688,994
164,008
292,866
396,128
238,486
396,128
(181)
(169)
-
105
(245)
-
-
(245)
(245)
(245)
-
288,190
21,304
(27,199)
1,768
(4,127)
-
-
(4,127)
(4,127)
(4,127)
21,135
20,001
37,177
684,622
164,008
292,866
391,756
234,114
391,756
Trade and other receivables
Contract assets
Inventories
Deferred tax assets
Total assets
Trade and other payables
Total liabilities
Net assets
Retained Earnings
Total equity
1. Adjustment for variable consideration receivable at the date of initial application of AASB 15. The application of the constraint
resulted in a reduction in contract assets of $5,895,000.
2. Adjustment relating to the presentation of Contract assets. Contract assets amounting to $27,199,000 have been reclassified from
Inventories (construction work in progress) to Contract assets.
3. Adjustment for additional impairment losses under AASB 9 amounting to $181,000 in respect of Trade receivables and
$169,000 in respect of Contract assets.
4. Tax impact of adjustments 1 and 3 above.
There has been no material impact on cash flow or other financial statements items on transition.
104 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
Impact on the consolidated Income Statement and Statement of Financial Position at 30 June 2019 of adopting AASB 15
The following table summarises the impact of adoption of AASB 15 on the Group’s Consolidated Income Statement and Statement of
Financial Position for the current year in comparison to the results that would have been reported had AASB 15 not been applied.
30 June 2019
Trade and other receivables
Contract assets
Inventories
Deferred tax assets
Total assets
Trade and other payables
Total liabilities
Net assets
Retained Earnings
Total equity
As reported
$’000
Adjustments
$’000
Amounts without
adoption of
AASB 15
$’000
322,849
8,200
331,049
29,661
4,607
34,164
684,986
184,341
290,305
394,681
231,006
394,681
(29,661)
27,356
(1,768)
4,127
-
-
4,127
4,127
4,127
-
31,963
32,396
689,113
184,341
290,305
398,808
235,133
398,808
For the year ended 30 June 2019, there has been no material impact on profit after tax, other comprehensive income or the
consolidated statement of cash flows on transition to AASB 15.
Monadelphous Group Limited | Financial Report | 105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
New accounting standards and interpretations issued but not yet effective
Australian Accounting Standards and Interpretations that have recently been issued or amended but are not yet effective (including
those below) have not been adopted by the Group for the annual reporting period ended 30 June 2019.
AASB 16 Leases
The application date of AASB 16 for the Group is 1 July 2019. The key features of AASB 16 are as follows:
Lessee accounting
• Lessees are required to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying
asset is of low value.
• A lessee measures right-of-use assets similarly to other non-financial assets and lease liabilities similarly to other financial liabilities.
• Assets and liabilities arising from a lease are initially measured on a present value basis. The measurement includes non-cancellable
lease payments (including inflation-linked payments), and also includes payments to be made in optional periods if the lessee is
reasonably certain to exercise an option to extend the lease, or not to exercise an option to terminate the lease.
• AASB 16 contains disclosure requirements for lessees.
Lessor accounting
• AASB 16 substantially carries forward the lessor accounting requirements in AASB 117. Accordingly, a lessor continues to classify
its leases as operating leases or finance leases, and to account for those two types of leases differently.
• AASB 16 also requires enhanced disclosures to be provided by lessors that will improve information disclosed about a lessor’s risk
exposure, particularly to residual value risk.
The Group will adopt AASB 16 using the modified retrospective method, recognising right of use assets equivalent to the lease liability
at transition. The Group will elect to use the exemptions allowed for lease contracts for which the lease terms ends within 12 months as
of the date of initial application and lease contracts for which the underlying asset is of low value. The timing of recognition of costs will
be brought forward as a result of higher interest expense in the earlier years of the leases.
Based on the current assessment a lease liability with a value of approximately $50 - $60 million will be recognised at 1 July 2019.
An assessment of the impact of other relevant new or amended accounting standards and interpretations set out below has yet to be completed:
Reference
Summary
AASB 2017-6
Amendments to
Australian Accounting
Standards –
Prepayment Features
with Negative
Compensation
This Standard amends AASB 9 Financial Instruments to permit
entities to measure at amortised cost or fair value through other
comprehensive income particular financial assets that would
otherwise have contractual cash flows that are solely payments of
principal and interest but do not meet that condition only as a result
of a prepayment feature. This is subject to meeting other conditions,
such as the nature of the business model relevant to the financial
asset. Otherwise, the financial assets would be measured at fair
value through profit or loss.
The Standard also clarifies in the Basis for Conclusion that, under
AASB 9, gains and losses arising on modifications of financial
liabilities that do not result in derecognition should be recognised
in profit or loss.
AASB 2017-7
Amendments to
Australian Accounting
Standards – Long-
term Interests in
Associates and Joint
Ventures
This Standard amends AASB 128 Investments in Associates
and Joint Ventures to clarify that an entity is required to account
for long-term interests in an associate or joint venture, which in
substance form part of the net investment in the associate or joint
venture but to which the equity method is not applied, using AASB
9 Financial Instruments before applying the loss allocation and
impairment requirements in AASB 128.
Application date
of standard
Application date
for Group
1 January 2019
1 July 2019
1 January 2019
1 July 2019
106 | Monadelphous Group Limited | Annual Report 2019
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
New accounting standards and interpretations issued but not yet effective (continued)
Reference
Summary
Application date
of standard
Application date
for Group
AASB 2018-1
Annual Improvements
to IFRS Standards
2015-2017 Cycle
AASB 2018-2
Amendments to
Australian Accounting
Standards – Plan
Amendment,
Curtailment or
Settlement
AASB Interpretation
23, and relevant
amending standards
Uncertainty
over Income Tax
Treatments
The amendments clarify certain requirements in:
1 January 2019
1 July 2019
• AASB 3 Business Combinations and AASB 11 Joint
Arrangements - previously held interest in a joint operation
• AASB 112 Income Taxes - income tax consequences of
payments on financial instruments classified as equity
• AASB 123 Borrowing Costs - borrowing costs eligible
for capitalisation.
This Standards amends AASB 119 Employee Benefits to specify
how an entity accounts for defined benefit plans when a plan
amendment, curtailment or settlement occurs during a reporting
period. The amendments:
• Require entities to use the updated actuarial assumptions to
determine current service cost and net interest for the remainder
of the annual reporting period after such an event occurs
• Clarify that when such an event occurs, an entity recognises the
past service cost or a gain or loss on settlement separately from
its assessment of the asset ceiling.
The Interpretation clarifies the application of the recognition and
measurement criteria in AASB 112 Income Taxes when there
is uncertainty over income tax treatments. The Interpretation
specifically addresses the following:
• Whether an entity considers uncertain tax treatments separately
• The assumptions an entity makes about the examination of tax
treatments by taxation authorities
• How an entity determines taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits and tax rates
• How an entity considers changes in facts and circumstances.
1 January 2019
1 July 2019
1 January 2019
1 July 2019
AASB 2018-6
Amendments to
Australian Accounting
Standards –
Definition of a
Business
The Standard amends the definition of a business in AASB 3
Business Combinations. The amendments clarify the minimum
requirements for a business, remove the assessment of whether
market participants are capable of replacing missing elements,
add guidance to help entities assess whether an acquired process
is substantive, narrow the definitions of a business and of outputs,
and introduce an optional fair value concentration test.
AASB 2018-7
Amendments to
Australian Accounting
Standards –
Definition of Material
This Standard amends AASB 101 Presentation of Financial
Statements and AAS 108 Accounting Policies, Changes in
Accounting Estimates and Errors to align the definition of ‘material’
across the standards and to clarify certain aspects of the definition.
The amendments clarify that materiality will depend on the nature
or magnitude of information. An entity will need to assess whether
the information, either individually or in combination with other
information, is material in the context of the financial statements.
A misstatement of information is material if it could reasonably be
expected to influence decisions made by the primary users.
1 January 2020
1 July 2020
1 January 2020
1 July 2020
Monadelphous Group Limited | Financial Report | 107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS:
OTHER
FOR THE YEAR ENDED 30 JUNE 2019
31. OTHER ACCOUNTING STANDARDS (continued)
New accounting standards and interpretations issued but not yet effective (continued)
Reference
Summary
AASB 2014-10
Amendments to
Australian Accounting
Standards – Sale
or Contribution of
Assets between
an Investor and its
Associate or Joint
Venture
The amendments clarify that a full gain or loss is recognised
when a transfer to an associate or joint venture involves a
business as defined in AASB 3 Business Combinations. Any gain
or loss resulting from the sale or contribution of assets that does
not constitute a business, however, is recognised only to the extent
of unrelated investors’ interests in the associate or joint venture.
AASB 2015-10 deferred the mandatory effective date (application
date) of AASB 2014-10 so that the amendments were required
to be applied for annual reporting periods beginning on or after
1 January 2018 instead of 1 January 2016. AASB 2017-5 further
defers the effective date of the amendments made in AASB 2014-
10 to periods beginning on or after 1 January 2022.
Application date
of standard
Application date
for Group
1 January 2022
1 July 2022
108 | Monadelphous Group Limited | Annual Report 2019
INVESTOR INFORMATION
FOR THE YEAR ENDED 30 JUNE 2019
Additional information required by the Australian Securities Exchange Limited and not shown elsewhere in this report is as follows.
The information is current at 9 September 2019.
a) Distribution of equity securities
The number of shareholders, by size of holding, in each class of share is:
Range
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 Over
Total
Total holders
5,444
3,749
661
558
38
10,450
The number of shareholders holding less than marketable parcels is 346.
b) Twenty largest shareholders
The names of the twenty largest holders of quoted shares are:
Rank Name
HSBC Custody Nominees (Australia) Limited
J P Morgan Nominees Australia Pty Limited
Citicorp Nominees Pty Limited
National Nominees Limited
BNP Paribas Noms Pty Ltd
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